The Godfather Of Fast Casual | Ron Shaich (Panera, CAVA)

Harley Finkelstein (00:00:00):
So, you've all heard the story of the kid that builds the lemonade stand, but I bet you have never heard the story of the guy that builds the billion dollar-

David Segal (00:00:09):
7 billion.

Harley Finkelstein (00:00:10):
Sorry, seven, actually, seven and a half billion dollar food empire. This guy is incredible. He goes from owning a convenience store, to starting a single cookie shop in Boston, to building Panera Bread, which he eventually sells for seven and a half billion dollars. And he goes into detail about how he did it.

David Segal (00:00:29):
Ron's stories are unbelievable when he builds this convenience store in such a creative way. I mean, it's effectively a spite store, right? Totally

Harley Finkelstein (00:00:38):
Spite store. Absolutely. But also, he is the king of transformations. He takes an idea and transforms it, and then takes that idea and then transforms again. And he does it over and over again until he finally realizes the opportunity available to him. And he says the biggest risk he takes is not whether he's going to fail, but whether or not he's able to actually see the full extent of that opportunity in front of him.

David Segal (00:00:58):
Yeah. Ron takes us... Actually, transformations is a big theme. He takes us through three, four distinct transformations. Each one, he talks to us about all the trials and tribulations along the way, these difficult, difficult decisions, the storms that he has to go through in order to get where he is, to where he wants to be in order to see those opportunities. This is an incredible interview.

Harley Finkelstein (00:01:15):
Amazing interview-

David Segal (00:01:16):
...from one of the most successful restaurants in the history of the world.

Harley Finkelstein (00:01:19):
And look. Right now, all of us know the fast casual world. We go to fast casual restaurants. We see them everywhere. This guy, our next guest, this next big shot, created the entire category. He was the inventor of fast casual.

David Segal (00:01:33):
Right. And he was supposed to be in politics.

Harley Finkelstein (00:01:34):
That's right.

David Segal (00:01:34):
I mean, he takes us through that transition, a personal identity transition, from going from what he thought would be this political career to becoming a titan of industry.

Harley Finkelstein (00:01:43):
And unlike so many of our other guests where, at their dinner table, they talked about audacity and ambition and building companies, that wasn't like that at dinner. His dinner table actually was the opposite. There was a lot of talk about socialism and communism at his dinner table. And so, he was very much the black sheep of the family.

David Segal (00:01:59):
Ron Shaich everyone, Panera Bread. It performed better, two times better than Starbucks, four times better than Chipotle. 25% returns zero over year for 20 years. Ron is amazing. His lessons are incredible. You're not going to want to miss this. Check it out.

Speaker 1 (00:02:13):
Started from the bottom, now the whole team here. We started from bottom, now we're here. Started from bottom, now my whole team here. We started from bottom, now we're here. We started from bottom, now we're here. I done kept it real from the jump...

David Segal (00:02:29):
Let's get into it.

Ron Shaich (00:02:30):
Okay, let's do it.

David Segal (00:02:31):
You built Panera Bread, which is thousands of stores, sold it for seven...

Ron Shaich (00:02:36):
Now Kava.

David Segal (00:02:37):
... trillion dollars. Now Kava. Now...

Harley Finkelstein (00:02:38):
Congrats.

Ron Shaich (00:02:39):
Thank you.

David Segal (00:02:39):
You wrote a book, Know what Matters. We're going to talk about all of it today, but let's start. Let's go back to New Jersey at the Shaich household.

Ron Shaich (00:02:47):
Sure.

Harley Finkelstein (00:02:47):
Dad's a CPA, I think.

Ron Shaich (00:02:48):
Dad's a CP-

(00:02:48):
... was a CPA.

Harley Finkelstein (00:02:48):
Was a CPA?

David Segal (00:02:50):
What was it like growing up?

Ron Shaich (00:02:51):
He actually swam with Lee.

Harley Finkelstein (00:02:53):
Really?

Ron Shaich (00:02:53):
Yeah.

Harley Finkelstein (00:02:54):
That's cool.

David Segal (00:02:55):
Yeah. What was it like growing up in Jersey in the Shaich household?

Ron Shaich (00:02:59):
I bring a different probably Jewish experience than a lot of the guests you've had here. I essentially grew up in a red diaper family. Do you know what that is?

David Segal (00:03:09):
No.

Harley Finkelstein (00:03:09):
No.

Ron Shaich (00:03:09):
So, a red diaper family was a political family that essentially identified even more than with religion, but with a lot of the ethical values of Judaism. And it took form as political activism. So> I-

Harley Finkelstein (00:03:26):
It wasn't religious Jews, it was more cultural Jews.

Ron Shaich (00:03:29):
Well, it took form ultimately as communism. They were CP members.

David Segal (00:03:33):
Wow.

Harley Finkelstein (00:03:33):
Wow.

Ron Shaich (00:03:34):
That's what a red diaper refers to, right? They came over from the old country. They were-

David Segal (00:03:39):
Poland, Russia...

Ron Shaich (00:03:40):
Yeah. They were political. I had a-

David Segal (00:03:43):
Were your parents born in America?

Ron Shaich (00:03:44):
My parents were born in America, but at least on my father's side, my grandparents were not. And their kids, they grew up in the New York area. They were all defined by political action. So, I had one cousin that tried to organize a union among US soldiers during Vietnam, during the Vietnam War. I had another soldier that was really on the vanguard of the whole free love and...

Harley Finkelstein (00:04:21):
Hippie kind of movement.

Ron Shaich (00:04:21):
Hippie movement in every sense. I had other cousins that left the country to Canada for political reasons and because they were in trouble here. So, I think my experience of it was less as a Jew from a religious perspective, but much more defined by the sense that we were changing the world. And to be anything other than very progressive was antithetical to the values of that family.

(00:05:05):
And I think many Jews had that experience.

Harley Finkelstein (00:05:09):
So, you weren't talking business around-

Ron Shaich (00:05:10):
Talking business, it took me many years to be able to feel comfortable as a business person...

David Segal (00:05:17):
Wow.

Harley Finkelstein (00:05:17):
Wow.

Ron Shaich (00:05:17):
... for just that reason.

David Segal (00:05:18):
Because the traits of capitalism sort of rubbed pretty hard against the traits of communism.

Ron Shaich (00:05:23):
Well, I mean, we talk about... The most wonderful experiences in my youth were Thanksgiving dinner. And Thanksgiving dinner was always a political argument between my own family. My father was a CPA, but in the core was in and around business.

(00:05:47):
My cousins were here in New York organizing. And it always broke out into a political war by the time the Turkey arrived. It was great, but we loved it. It was dynamic, it was thought-provoking...

David Segal (00:05:59):
And it was high quality discourse.

Ron Shaich (00:06:01):
Yeah. Well, it was both high quality discourse. And it was...

(00:06:08):
I mean, it brought a very radical perspective. And so, I have a cousin, for example, who has a PhD from Columbia in Soviet studies was still protecting and arguing that Stalin and basically Soviet politics were correct post Gorbachev.

David Segal (00:06:29):
Wow.

Ron Shaich (00:06:29):
I mean, they were very, very involved.

Harley Finkelstein (00:06:32):
Tough to bring a new girlfriend home.

Ron Shaich (00:06:34):
I mean, certainly tough to... You had to be prepared to engage in the dialogue.

David Segal (00:06:40):
And you probably give a sort of proviso of-

Ron Shaich (00:06:42):
Simply being progressive wasn't enough.

Harley Finkelstein (00:06:44):
And was-

Ron Shaich (00:06:45):
They were anti-business. They were-

David Segal (00:06:47):
Anti-business. Right.

Ron Shaich (00:06:48):
Anti... You know.

David Segal (00:06:49):
That is a very different Jewish experience because most of the guests... Most of the Jewish experience is work hard, make a lot of money, create more opportunity.

Ron Shaich (00:06:59):
This was a part of the Jewish experience that goes back to the labor union movement, to the garment district...

Harley Finkelstein (00:07:05):
That's the irony. We're on both sides of the fence.

Ron Shaich (00:07:06):
Yeah. Yeah. And I had relatives that were friends with the Rosenbergs, who-

David Segal (00:07:14):
And yet, your dad, though, was a poker player. He was an accountant.

Ron Shaich (00:07:17):
Yeah.

(00:07:17):
He was sort of the black sheep of the family. He went into business and became a business person. And so, every Thanksgiving broke down in a war because he undoubtedly knew the slum Lord that they were organizing against. On the other hand, they came to him for advice. And over time, it sort of evolved, but it was a family, and I guess my first definition of myself, which is really what a lot of this is about, and what we're really here to talk about today. How do you define yourself? Who are you?

(00:07:51):
My first definition of myself was rooted in a political identity. So, I came alive during the anti-war movement. My cousins were involved in something, a group called SDS, Students for a Democratic Society. Who was I? And where did I fit?

(00:08:07):
And I actually took a year off before I went to college. And I played out that political identity. I went to DC, worked for a congressman, ran a couple of state senate campaigns, was a delegator for George McGovern, the youngest one in the state of New Jersey. I ran as alternative candidate for delegate. And I was very political. And I actually went off to a university called Clark University in Worcester, Massachusetts. And frankly, I went there. It was-

David Segal (00:08:40):
Liberal Arts?

Ron Shaich (00:08:41):
Yeah. I mean, I studied liberal arts. I got a degree in government and psychology. But I'll tell you the story that I really only studied for two years there. And it was really...

(00:08:58):
I tell the story. I was later chairman of the board of Clark and very involved, and I love this school. And I love it because it's a powerful place to discover who you are in your own identity. It's a small, progressive, top-notch research institution. I tell people I came there a self-proclaimed socialist, and I left to go to the Harvard Business School. And how do you get there? And that's really the story. I got there through a set of experiences, which I'll describe to you, but I was able, at this institution, to try out a bunch of different identities.

David Segal (00:09:37):
What'd you try out?

Ron Shaich (00:09:38):
Well, I will say that, my freshman year, because I had taken a gap year, it was all academic. And I was really interested in international politics and a number of other things. The end of my freshman year, I got elected treasurer of the student body. And in my sophomore year as treasurer, I was tossed out of a local convenience store across the street and accused of shoplifting.

David Segal (00:10:02):
Wow.

Ron Shaich (00:10:03):
And I walked back and-

David Segal (00:10:04):
You say accused, so you didn't do it?

Ron Shaich (00:10:05):
I didn't do it.

David Segal (00:10:06):
Okay.

Ron Shaich (00:10:06):
And to tell you how funny it is, ironically, a decade later, I was on the board of this convenience store chain, but they-

David Segal (00:10:12):
We'll get there.

Ron Shaich (00:10:13):
They had a heavy presence of security for the kids. And I came back to campus, I was with some friends. I said, "What the hell are we supporting these guys for? Let's open our own nonprofit convenience store." It was very-

David Segal (00:10:26):
A spite store.

Ron Shaich (00:10:27):
Yeah, exactly. A screw you.

David Segal (00:10:29):
Yeah. Yeah. You watch Curb Your Enthusiasm?

Ron Shaich (00:10:31):
Yeah. And I came back to campus. And because I was treasurer of the student body, I had the wherewithal. We basically passed a tax on the student body to fund a store. And we raised, I think it was, I don't know, 50 or $60,000. And we now had a problem.

David Segal (00:10:53):
Which is funny because here you are transitioning to a businessman, but you're using socialist taxes in order to do it. [inaudible 00:11:01]

Ron Shaich (00:11:02):
Excuse me buddy. I don't know if I'd call it socialist taxes. I mean, this was a student fee that the students voted on...

David Segal (00:11:09):
They vote, fair enough.

Ron Shaich (00:11:09):
Yeah, in support, but it was going to be a nonprofit store for their benefit.

David Segal (00:11:14):
But it's not something most business students would think to do. Right?

Ron Shaich (00:11:17):
Yeah, I was in a business. I had no interest in business. I was going to change the world. And if my life hadn't played out differently, I probably would've gone to law school. And I would've gone into politics. And I'll talk in a second about the challenges of which way I was pulled. But at any rate...

(00:11:34):
So, as a sophomore, we had raised the money. We faced the prospect who's going to build the store. And I said, "All right. I'll stay up here this summer. I'll build the store."

(00:11:44):
And I was given, by the university, the faculty wives' thrift shop and given permission to build the store in there. And I hired a drunken old carpenter. And I bought the fixtures for this store at a department store that had gone out of business. And I spent the summer building it. And we got to the beginning of the school year and there was nobody to run it. So, I decided I would run it as the first general manager of the store.

Harley Finkelstein (00:12:10):
While you were going to class.

Ron Shaich (00:12:11):
Yeah, yeah. But this became more important than class. And I guess the way I would describe it... For a Jewish kid who can't dance, who can't sing, who has none of that kind of creativity in him, I discovered this store and being a merchant as the most creative thing I had ever experienced in my life.

(00:12:34):
To me, it was live performance art. And I loved it. I love the merchandising, I love the people. I love the choreography of it all. I love making it happen.

David Segal (00:12:44):
And all the profit, I assume, went back to the student body.

Ron Shaich (00:12:47):
Yeah. Well, let me tell you how that all worked. It didn't quite play. So, we had a problem.

David Segal (00:12:51):
Okay.

Ron Shaich (00:12:52):
Right?

David Segal (00:12:52):
What was the problem?

Ron Shaich (00:12:53):
We made money.

David Segal (00:12:53):
Okay.

Ron Shaich (00:12:54):
Right? Now, what are you doing?

David Segal (00:12:55):
That wasn't the plan.

Harley Finkelstein (00:12:56):
That's a pretty good problem.

Ron Shaich (00:12:57):
Yeah. So, we lowered the prices, we made more money. We ended up that first year... I don't know what we had, 70, 80,000 a profit, a bunch. We made a serious surplus in the till. And my idea, I really did want it returned to the student body. My idea was to throw a Grateful Dead concert on the green at campus.

David Segal (00:13:17):
Amazing.

Ron Shaich (00:13:18):
And you could have brought it to campus for that kind of money back then. This is when the university, which didn't support the store initially, decided they did support it. And this, of course, ended up in the scholarship fund, but that store went on to be in existence for decades, became an institution. I loved the experience. And I began speaking around the country on how to open these stores on other campuses.

David Segal (00:13:46):
This became a model for how to fund... It's also sort of for us, by us. It's sort of a way to fund it ourselves.

(00:13:52):
But also, did it provide an opportunity for students to get their first sort of experience in business creation?

Ron Shaich (00:13:59):
Absolutely.

David Segal (00:13:59):
Okay. That was a part of it.

Ron Shaich (00:14:00):
And to get their experience running it. I mean, it was a paid job, the highest paid job on campus. And your responsibility was to make sure that ran and I did it. And we-

David Segal (00:14:10):
And what was Thanksgiving dinner like when you came home and told the cousins you're in business now?

Ron Shaich (00:14:15):
I mean, we always were sort of the black sheep because we were the business people.

Harley Finkelstein (00:14:20):
So then, it was like [inaudible 00:14:22].

David Segal (00:14:22):
Apples far from trees.

Ron Shaich (00:14:23):
Yeah. I mean, it was like my dad was always getting pressed and... You know.

David Segal (00:14:29):
Was your dad proud of you about that?

Ron Shaich (00:14:30):
Was my dad proud of me about the store? I don't know how much he really related to the store. He was later when we took a company public. But yeah, I mean, I think he certainly could feel it and sense it. But the important lesson here is I never knew how beautiful, how creative the process of business was.

(00:14:52):
It wasn't in my set of experiences. But as I began to discover that, I had the cognitive dissonance of how I saw myself and what my role was in life, which was to change the world and impact the world, make a difference versus myself as a business person. And that took me a while to really work through.

David Segal (00:15:13):
Yeah. I mean, you didn't call it this, but that mean TKU malum is that. Right?

Ron Shaich (00:15:18):
Yeah.

David Segal (00:15:18):
That's effectively what you're... You're tying to actually have an impact and change things for the better.

Ron Shaich (00:15:22):
And TKU alum essentially takes form often as contributing money. And this is much more central to what is the core of your life. And so, so much of what my family was about was that religion was politics. Politics was social change, social impact in a powerful way.

(00:15:47):
And it took me a decade or more, but I came to discover that business, in my case, was the most powerful way to impact the world and to bring about social change.

David Segal (00:15:59):
It was sort of your skillset. You weren't six six and to be able to play basketball. You didn't have a great voice. Your version of your superpower was business creation can allow you to do all this other stuff.

Ron Shaich (00:16:12):
Yeah. I don't think I got to that sense of it being a superpower. I got to a sense of how beautiful it was.

Harley Finkelstein (00:16:17):
This is where you came alive.

Ron Shaich (00:16:18):
Yeah. I loved it. And I would say to you, for the first time in my life, I really felt like I was home.

Harley Finkelstein (00:16:31):
Yeah.

David Segal (00:16:32):
Your people, your community.

Ron Shaich (00:16:34):
I wasn't political in that same way.

David Segal (00:16:36):
But you didn't-

(00:16:36):
At that moment, you felt alive and you felt at home, but you didn't yet identify as a business person. There was still that divide.

Ron Shaich (00:16:43):
Not at all. Not at all.

David Segal (00:16:44):
So, you decided to go to Harvard Business School.

Ron Shaich (00:16:46):
Well, yeah. So I was doing-

David Segal (00:16:48):
What did you tell yourself?

Ron Shaich (00:16:48):
So, I was doing a lot of speaking. And people said to me, "Hey, you can apply to HBS, Harvard Business School. You'll get in."

(00:16:54):
And they didn't accept me as an undergrad. It seemed pretty attractive. So, I applied, but I didn't understand what I was doing there till I had graduated. I didn't know what an investment banker was. I didn't know what a venture capitalist was. And I would sit in that classroom in Cambridge and think to myself, "The guy who runs the Gulf station on the corner, he has more control over his life."

David Segal (00:17:18):
Than any of these people will.

Ron Shaich (00:17:19):
Than any of my peers who were working on Exxon or IBM or Enron, where they were on their way to help with that.

Harley Finkelstein (00:17:27):
Why do you feel he has more control over his life?

Ron Shaich (00:17:34):
First, I'll step back and just say something. One of the beauties of business, and it gets to me as a political person, is business is the last of vestiges of really being able to create a mini society. When you run a business, you create your world.

(00:17:52):
And so, we can talk about incentives. Incentives are like tax policy. What drives people? What is it about the old Soviet system that was such a miserable failure as compared to, shall we say, the way the United States works? You can take the same people and move them from one system to another, and they're much more productive.

Harley Finkelstein (00:18:14):
Incentive drives decisions in action.

Ron Shaich (00:18:15):
Well, the whole culture does. What's the culture in Finland? What's the culture in the United States?

David Segal (00:18:23):
I mean, the whole idea-

Ron Shaich (00:18:24):
Canada, it's a great example.

David Segal (00:18:25):
Well, Canada is so interesting because we're right across the border, but this idea of American exceptionalism, true entrepreneurial capitalism is actually quite different in Canada.

Ron Shaich (00:18:34):
Yes.

David Segal (00:18:35):
In Canada, we have something called the top poppy syndrome, which is, you can be successful, but if you get too successful-

Ron Shaich (00:18:39):
We'll cut you off.

David Segal (00:18:40):
We cut you off. That doesn't happen here.

Harley Finkelstein (00:18:42):
Different culture.

Ron Shaich (00:18:42):
Right. And on the other hand, the United States has this culture of frontier independence, which...

Harley Finkelstein (00:18:52):
To a fault, sometimes.

Ron Shaich (00:18:53):
Well, often to a fault. We talk about gun control. You can talk about independence. The strength of America is its fluidity. The weakness of America is its fluidity.

(00:19:05):
One day, I can be a truck driver the next day a Baker. It's beautiful.

David Segal (00:19:09):
So, is that why you'd feel that your peers at Harvard Business School, although they may be executives or never have the freedom of that person... because that person can have all kinds of upward mobility? I mean, what...

Ron Shaich (00:19:19):
I don't know that there's any life that is more self-actualizing. There's a ton of pain that comes with it, but is more self-actualizing than actually being an entrepreneur, and building an organization, and being able to deal at the broadest levels with a range of issues.

(00:19:44):
Most professions, most jobs, whether you're a lawyer or a doctor, whether you're an executive in a large corporation, you're basically getting a slice of the pie. And you're often a cog in the machine.

Harley Finkelstein (00:20:01):
Yeah. You accept an environment that's been created for you as opposed to the entrepreneur. Or in your case, sitting at Harvard, the guy who owns the garage at the gas station, he created or she created their own version of a world.

David Segal (00:20:12):
[inaudible 00:20:14]

Ron Shaich (00:20:14):
And you're the buck stops here. Whereas, in an organization, you're not. And so-

David Segal (00:20:20):
So, you're in Harvard Business School. You're kind of out of place there. Did people...

(00:20:23):
I mean, did you still... Were you still running... Were you still doing speeches and stuff at this point?

Ron Shaich (00:20:27):
Oh, no. I was-

David Segal (00:20:28):
You went full into this business.

Ron Shaich (00:20:30):
Yeah, and I was trying to... I was just... If you know HBS, it takes you about six months to a year to figure out why you're there.

David Segal (00:20:36):
That's right. Small groups and navigating.

Ron Shaich (00:20:39):
And just to get through it. And for me, it was just to get through it. And the big question for me at HBS is what was I going to do when I graduated? And I had two pulls. One was politics, and I love campaigns. On the other hand, I also love business. And to me, they're very similar. A campaign is just a business that has one day in which the consumer makes their decision. A business is an election in which there is a continual election day that never ends.

David Segal (00:21:11):
I love that.

Ron Shaich (00:21:11):
But literally, it's the same. It's about figuring out who your core constituents are and being the best advantage for certain target customers, not for everybody. So, I had these pulls. And when I graduated, I attempted to do political campaign consulting. I ended up taking what I call the third year of an MBA.

(00:21:33):
I went to work for a large public company in Cleveland, Ohio, run by a guy named Joe Cole, Cole National. It had key departments in Sears of Montgomery War. It had something called Things Remembered. It had a division called the Original Cookie company. I went in to run a chunk of the country for the original cookie company.

David Segal (00:21:54):
And these were retailers and malls and stuff like that?

Ron Shaich (00:21:56):
Yeah. They were only in malls. And... I'm sorry.

David Segal (00:22:00):
No, no.

Ron Shaich (00:22:01):
And so, I stayed as long as I felt I was still learning. I used to say, third year of the MBA, when there was no value in running the Xerox machine, I was going to get out of there. And I lasted there about a year and a half, there about a year and a half. I walked into my boss, who was the CEO. And I said, "Boke," I said "I got this idea. I want to open cookie stores in an urban location. There's a lot more people in downtown locations than there are in malls."

(00:22:31):
And he said, "Ron, that's a great idea, but we only operate in malls. That's our mantra. That's what we do." And one thing led to another, and I often have had this experience. I said, "Well, it makes sense to me. I'm going to go do it."

David Segal (00:22:43):
On your own.

Ron Shaich (00:22:44):
Yeah. And so, I quit and I came back to Boston.

David Segal (00:22:47):
How old are you at this point?

Ron Shaich (00:22:49):
Well, I went right from undergraduates, so probably 24. Yeah. Yeah, 24, 25.

David Segal (00:22:54):
And this is, I mean, your Harvard peers are not opening cookie stores.

Harley Finkelstein (00:22:57):
What do you mean? His Harvard peers are all at McKinsey or Goldman or...

David Segal (00:22:59):
Exactly. Right? But they're probably making a lot of money.

Ron Shaich (00:23:03):
But ultimately, they all came around. They wanted to be me.

Harley Finkelstein (00:23:05):
Right. Exactly.

David Segal (00:23:06):
Now, they all want to work for you.

Ron Shaich (00:23:06):
I promise you. Yes.

David Segal (00:23:07):
Now they call you to hire their kids. Yeah.

Ron Shaich (00:23:09):
Yes. Exactly.

Harley Finkelstein (00:23:10):
I just had the experience in law school where no one took me seriously in law school, because I was selling T-shirts, and they all kind of laughed at me.

Ron Shaich (00:23:14):
Well, I didn't tell you the story along the way. Right? Now, we're going to go into it.

(00:23:18):
But along the way, after I opened these stores, my senior year...

Harley Finkelstein (00:23:23):
Of college.

Ron Shaich (00:23:23):
Yes, my senior year of college, I was doing a lot of the speaking. I ran into somebody who was working with a company called Harts Mountain, which is actually another really good guy for you to speak to here if you know these guys. What's his name? He's one of the largest real estate developers in the country here. But at any rate, a guy was with Hart's Mountain. They were just shifting. Inflation was roaring at 20%. They were shifting Flea Collars from 99 cents to a buck 59.

(00:23:52):
He said, "We have all this merchandise priced/labeled 99 cents. We want to get rid of it, but we don't want it going into our channels. I can get it for you if you want. You can buy it by the trailer load, if you can promise me you can distribute it in ways that doesn't cut back into my channels."

(00:24:08):
In the end, I bought this stuff. And I bought it by the trailer load. I rented an old A and P. And I would go to flea collars in New England, English town out down here in New York. I'd wear a dog face mask. And I'd sit there with a microphone and I'd be saying, "Get your flea collars. Get them here."

Harley Finkelstein (00:24:27):
Oh, wow.

Ron Shaich (00:24:27):
"These flea collars are priced a dollar 99."

Harley Finkelstein (00:24:29):
Awesome.

Ron Shaich (00:24:30):
" Three for 99 cents here. Get them now. Get them before the police get me. They may be hot. Get them now." And I had so much fun.

Harley Finkelstein (00:24:39):
Wow.

Ron Shaich (00:24:39):
But I'd take thousands of dollars home in cash.

David Segal (00:24:42):
That's amazing.

Harley Finkelstein (00:24:42):
It was before TJX, right? You were the first clearinghouse basically.

Ron Shaich (00:24:47):
Yeah. Yes. Literally, I was selling off price and I was selling it in a way that did disturb [inaudible 00:24:55].

David Segal (00:24:54):
So, you're at Harvard MBA?

Ron Shaich (00:24:56):
No, I did this before.

David Segal (00:24:57):
Before, okay.

Ron Shaich (00:24:58):
I did it my senior year. So basically, after my sophomore year, I stopped going to classes. I did the general store my junior year, and I did the flea collar thing my senior year.

Harley Finkelstein (00:25:08):
That's great.

Ron Shaich (00:25:08):
And then, I went back to HBS.

Harley Finkelstein (00:25:11):
My experience is very... I was at McGill, but I stopped going after second year because my teacher business had took off. And actually, I thought that I was going to learn more from selling Shmuttons than I was from taking a bunch of courses in undergrad in college.

David Segal (00:25:20):
And you did.

Harley Finkelstein (00:25:22):
And I certainly did. And by the way, like you, I didn't know what my thing was, but this thing that I discovered called entrepreneurship for the first time in my life felt like that's a thing that I feel really good about. I actually like this thing. It feels democratic. It feels ambitious. It also feels like my creative...

(00:25:38):
I'm not a painter, but this is sort of my version of painting.

Ron Shaich (00:25:40):
Literally. And what was ironic for me is I never had to work hard at any of this.

Harley Finkelstein (00:25:45):
Right.

Ron Shaich (00:25:46):
I worked harder than anybody.

Harley Finkelstein (00:25:47):
You worked hours, but it was different. It was a different type of work.

Ron Shaich (00:25:51):
It just flowed for me in every which way.

David Segal (00:25:55):
So, you're walking out of your boss's office, you're saying you want to go start this sort of cookie company, but not in the suburbs and malls, but actually in urban centers. What do-

Harley Finkelstein (00:26:04):
But not in the suburbs and malls, but actually in urban centers. What are you thinking as you're walking out of his office? You just quit your job.

Ron Shaich (00:26:07):
I waited a month before I quit, but I said, I'm going to go back to Boston and go do this. And I actually went to my dad and I said I want my inheritance.

Harley Finkelstein (00:26:16):
Early.

Ron Shaich (00:26:17):
Yeah, I want it now so I can put it into place. And I also said to him, "I want it in three shots in case I blow it." It was maybe a quarter of a million dollars and it was what he was going to leave me. And I said, "I want 75,000 to help open a store. I have 25,000 bucks and if you can give me that, if I screw it up, I got another two shots." And he said he'd be happy to help me.

Harley Finkelstein (00:26:42):
Wow.

Ron Shaich (00:26:43):
Yeah, and-

Harley Finkelstein (00:26:44):
Why? I mean, you have no track record. I mean, I guess you did some convenience stores, but-

Ron Shaich (00:26:48):
Why did I want to-

Harley Finkelstein (00:26:50):
No, why did he believe in it? How did he-

Ron Shaich (00:26:52):
He wanted to support me.

Harley Finkelstein (00:26:54):
Okay.

Ron Shaich (00:26:55):
It wasn't he believed in it. He probably-

Harley Finkelstein (00:26:56):
It wasn't an investment for him.

Ron Shaich (00:26:57):
No, no. It was my money. And I said-

Harley Finkelstein (00:26:59):
He was basically fronting you your own money, right?

Ron Shaich (00:27:02):
Yeah. He fronted me the money, and I had a pay in different things he asked of me. Let me just say there's always a quick pro quo. But yeah, he helped me out and getting money. But here's the story. So I came back to Boston I couldn't lease a space. Nobody would lease me space. I had no credibility. Who am I? I had worked for chain of cookie stores.

(00:27:26):
Guys that are now my friends wouldn't lease me space in Harvard Square, and I wouldn't find a space. I ended up getting an opportunity. Somebody saw my resume and I got an opportunity to go to DC, and to do political campaign consulting. And it was the premier Democratic campaign consultant guy named Matt Reese. We had a technology geo demographic targeting based on something called the Claritas Cluster System. PRIZM. You may know what it is. But at anyway we ended up creating a consulting firm that did most of the major Democratic senate campaigns that election cycle.

Harley Finkelstein (00:28:04):
And you were basically using data technology to figure out who to target with what message?

Ron Shaich (00:28:09):
Yes. He had the technology. He didn't know how to turn it into a business. I knew how to turn it into a business. The deal was, I said to him, "Give me three months. If I can figure out how to make this thing work, I want to run it." And I became the president of this thing, targeting systems. Incorporated his name, he had the credibility and the connections. I knew how to make it work. We ran the largest national political poll that ever had been run up until that point to fuel it.

(00:28:35):
We were in a position to provide a much more targeted information. If you were running in Louisiana, we could show you the pro-choice voters in Louisiana. It's a whole other thing. I won't take you through the detail, but I was doing this a couple of years and I get a phone call. Guy says to me, "Hey, I got two jewelry stores in downtown Boston. Inflation is at 20 odd percent. We want to combine our inventories. I know you tried to approach us to lease space a couple of years ago. Would you like to lease space?"

Harley Finkelstein (00:29:09):
Wow.

David Segal (00:29:09):
Well, he's scraping in the bottom of the barrel because it's the worst of times.

Harley Finkelstein (00:29:12):
He's going back to the person that he knew would be more [inaudible 00:29:15].

David Segal (00:29:14):
He'll give it to anybody that'll take it. Everyone was boarded up by-

Ron Shaich (00:29:17):
Well, no, his problem was the cost of his inventory was so high. He wanted to merge into one store. So he had excess space. So he leased me 400 square feet on Winter Street. It connects Park Street Station with Filene's in downtown Boston. And my original model was I'd come back one day a week to Boston. I was running this firm and-

David Segal (00:29:37):
And they were okay with this. They let you-

Harley Finkelstein (00:29:39):
Well, you're the president also.

Ron Shaich (00:29:40):
Yeah, and Matt was fine and I'd come back. But what started as one day became three, and I ultimately opened that first store. And by that point I'd said to Matt, "Listen, I'll stay on your board or help you, but I can't do this."

Harley Finkelstein (00:29:58):
But let's go back to the store opening. So the store opens, it's the Cookie Jar Bakery.

Ron Shaich (00:30:02):
Yes.

Harley Finkelstein (00:30:03):
And it's effectively emulated or a replica of what you had learn in suburbs?

Ron Shaich (00:30:10):
Well, I'd say it differently. No. I'd say, look, the beauty of creating your own business is I get to create the place I want to work in. And that more than anything else was the driving force. I got to figure out the product. I sat on the street corner. I started with a toll-house recipe, and I gave out product in front of this store.

Harley Finkelstein (00:30:32):
I mean, a toll is you're not even creating proprietary recipes, right?

Ron Shaich (00:30:34):
Well, I started with that, but then I kept evolving it based on listening to consumers in front of the store before I even opened the store. I got to hire the people. I got to create the environment. It was again, the beauty of approaching something writ large of being able to create it.

Harley Finkelstein (00:30:52):
And the biggest player this time is like Mrs. Fields kind of thing.

Ron Shaich (00:30:56):
Mrs. Fields Original Cookie.

Harley Finkelstein (00:30:58):
Yeah.

Ron Shaich (00:30:59):
They were generally mall based.

Harley Finkelstein (00:31:00):
But sort of in the food court of the mall kind of thing.

Ron Shaich (00:31:03):
Yeah, or-

David Segal (00:31:04):
Were you making enough out of the gate?

Ron Shaich (00:31:06):
Me?

David Segal (00:31:06):
The store or you. Yeah.

Ron Shaich (00:31:07):
Well, here was the deal. We had 50,000 people a day going by. They were buying a ton of cookies after 12 noon. I had actually a very cushy life. I'd come to work about 11 o'clock and I was making a few bucks, but I began to say, "Wait a second. We got 50,000 people a day going by in the morning. What are we going to do with them? What are we going to sell them?" And so much in life it's serendipitous. I approached a number of different companies if they wanted to give me a license or a franchise to sell French baked goods.

Harley Finkelstein (00:31:40):
In the same location?

Ron Shaich (00:31:41):
In the location.

Harley Finkelstein (00:31:41):
Okay.

Ron Shaich (00:31:42):
In the morning. We'd sell French baked goods in the morning and cookies in the afternoon. And I met a company, met a guy named Louis Kane who had a company called Au Bon Pain. And Au Bon Pain started in Faneuil Marketplace. He had Colombo Yogurt. He bought it. He was our version of Blake Carrington. He was amazingly connected. He knew everybody who was on the senior fundraising team at Harvard.

(00:32:11):
He would've probably ended up as the commandant of the Marine Corps. He was a long time Marine Corps officer. He was a Boston Brahmin, Jewish Brahmin, but a Boston Brahmin. And he was an extraordinary man. And Louis was running it, but he wasn't an operator. And they had opened 13 units. In fact, they were up in Canada in place.

Harley Finkelstein (00:32:33):
It's funny, we actually know Au Bon Pain probably more in Canada than most people do here because it was an early business, but-

Ron Shaich (00:32:42):
Well, they all closed.

Harley Finkelstein (00:32:43):
Did they? Okay. But the reason that you thought they'd be good is it was sort of complimentary that he would do kind of baked goods, you were doing kind of cookies, they kind of thing all fits together. And you were with the leverage in fact that 50,000 people were going by every single [inaudible 00:32:56].

David Segal (00:32:55):
But you said license though, couldn't you just bought bread from them and that's-

Ron Shaich (00:32:58):
I suppose I could, but I wanted that name.

David Segal (00:33:00):
You wanted the name.

Ron Shaich (00:33:01):
But a sidebar comment, not for the tea. Do you know Michael Bregman? He's Michel's Baguette who's also-

David Segal (00:33:07):
Oh yeah, totally.

Ron Shaich (00:33:08):
... in Toronto.

David Segal (00:33:09):
Yes. He also had Second Cup.

Ron Shaich (00:33:11):
Yeah.

David Segal (00:33:11):
Yes, I know Michael, yeah.

Ron Shaich (00:33:12):
Yeah, [inaudible 00:33:12] Michael cup. It's another great story. We talked about the Canadian connection. But anyway, so Louis had this business. He'd opened 13 restaurants all over the country. He closed 10 of them. It was financed with personal debt. And this was when interest rates were north of 20%. And the only way I can describe it, I became a licensee of theirs. When you're an operator, which of your vendors are any good and which aren't. They were the most screwed up vendor I ever dealt with. I mean, sometimes they delivered, sometimes they didn't. Sometimes they build me, sometimes they didn't. I guarantee you, to this day, I still owe money. They were comfortable.

Harley Finkelstein (00:33:52):
And they still don't even know.

Ron Shaich (00:33:53):
Yeah, didn't have a clue.

Harley Finkelstein (00:33:54):
But the product you thought was good.

Ron Shaich (00:33:55):
Yeah, the product was good. And Louis was such a class act.

David Segal (00:34:00):
And the name was a known name which helped your business.

Ron Shaich (00:34:02):
Yeah, and we were there about three months, and I began to say, "Wow, this is really an even better opportunity." I could take what I learned in the cookie business and what I know to do how to build a business, and basically, if I could take control of Au Bon Pain I could do it with that. And I went to Louis and I didn't realize they were really in trouble, but one thing led to another and we made a decision to put these two businesses together. My one cookie store, which was the cash cow and his three at that point Au Bon Pains, and three and a half million dollars in debt. And we were going to fight our way out of the debt.

Harley Finkelstein (00:34:43):
So this Big Shot thing is super fun. We're having a great time. People are loving it. It's a little expensive. Just to say it. At the end of the day we are.

David Segal (00:34:54):
I'm glad you said it.

Harley Finkelstein (00:34:54):
We're still stingy Jews here. It's really quite expensive. And you and I are funding this whole thing ourselves.

David Segal (00:34:59):
[Inaudible 00:35:01].

Harley Finkelstein (00:35:00):
I think at the very least, we should at least promote our tea business.

David Segal (00:35:04):
You all see the production quality. I mean-

Harley Finkelstein (00:35:06):
The production quality is incredible. We have an amazing staff, tons of producers, and it's a little expensive.

David Segal (00:35:13):
So I'm obsessed with tea. I built DAVIDsTEA. I left many years ago, and Harley actually encouraged me.

Harley Finkelstein (00:35:19):
I can't believe we're doing this. This is perfect.

David Segal (00:35:20):
We're doing this because we have great tea, but also we got to pay for Big Shot.

Harley Finkelstein (00:35:25):
Perfect.

David Segal (00:35:26):
So Harley got me back into tea. I would curate these green tea collections for you. You having trouble sleeping in the evenings I'm like, "Oh, switch to coffee. You don't need 10 coffees today."

Harley Finkelstein (00:35:34):
Well, I mean, if we're going to tell the story, let's tell the story. I had been drinking so much during the pandemic. I was by myself, obviously the rest of us were, and I was drinking a ton of coffee and my anxiety was peaking. And actually you had said you should switch off of coffee in the afternoon and moved to really high quality green tea.

David Segal (00:35:50):
The caffeine and green tea interacts differently. You don't get the big spike in crash.

Harley Finkelstein (00:35:54):
It's like a calm alertness almost.

David Segal (00:35:56):
Almost a calm alertness. And green tea is amazing, really high quality green tea. And then-

Harley Finkelstein (00:36:00):
But frankly like most people, I had never had high quality green tea. Most of the tea that I had consumed in my life it was in a gift. I'd give a talk somewhere and they give me a gift box or some sort of gift package, and there'd be some random tea bags in there. But I had never actually had really high in green tea. So you very kindly started curating this box of incredibly high-end, amazing green tea.

(00:36:22):
And you also began to sort of Jerry rig these accessories for me. You'd say, "Drop it in here for three minutes and then take it out, make sure it's not steaming." And you just created this incredible tea setup for me. In fact, you know this, but next to my home office, I now have a little tea area that you actually created for me.

David Segal (00:36:38):
Right.

Harley Finkelstein (00:36:39):
But green tea in particular, and having you curate this tea for me was this incredible new element of my life because it allowed me to stay really energized, really focused in the afternoon without having any issue with sleeping.

David Segal (00:36:51):
And that was the inspiration for Firebelly. Finally, you're like, "Let's do it. I'll be your partner." So we started Firebelly Tea. Most people want to take a tea bag and dunk it in the water. And the reality is there's this rich experience you can get with tea where you take the time to make it properly. Whether it's green tea, black tea, oolong tea, herbal teas. We're doing something special with Firebelly.

Harley Finkelstein (00:37:10):
Yeah. So Firebelly is the best tea. And actually you got a chance to design every single accessory yourself.

David Segal (00:37:17):
Absolutely.

Harley Finkelstein (00:37:17):
You went ahead and figured it out. This is the best tea cup. This is the best strainer for it. This is the best whisk in terms of how to make great matcha. But this is the best tea and the best tea products ever. And please buy our tea. We need a way to pay for more Big Shot episodes, so we don't need your money, but we would appreciate you buying some amazing green tea from firebellytea.com. It is not just a pitch. It is also the greatest tea ever. And it would make us really happy.

David Segal (00:37:44):
If you don't like it, we'll give you your money back.

Harley Finkelstein (00:37:45):
No, no, we're doing that. We're not giving the money back.

David Segal (00:37:47):
Why not?

Harley Finkelstein (00:37:47):
We're keeping your money.

David Segal (00:37:48):
You're going to love it.

Harley Finkelstein (00:37:49):
But you're going to love it.

David Segal (00:37:50):
You're going to love it.

Harley Finkelstein (00:37:50):
All of a sudden you're such a Big Shot, you're giving people's money back. Don't give money back.

David Segal (00:37:53):
Or you'll give it as a gift. It makes a great gift.

Harley Finkelstein (00:37:55):
It's a great gift, it's great tea, it's great accessories. You actually will really, really love it and allow us to pay for more of these Big Shot episodes. So that's our pitch. And all of you must be laughing wherever you're sitting right now watching this. We don't care. We have-

David Segal (00:38:10):
We actually know tea well though.

Harley Finkelstein (00:38:11):
We know. I mean, we also know e-commerce well too.

David Segal (00:38:12):
Yeah, true.

Harley Finkelstein (00:38:13):
So we know e-commerce, we know tea. Firebelly Tea. Go buy some. Help us pay for more Big Shot episodes. So I know our audience. I know our [inaudible 00:38:22]. They're going to say, "Yeah-

David Segal (00:38:22):
Want the code.

Harley Finkelstein (00:38:23):
... we love your tea, we want to buy from you. We want to support Big Shot. Is there a coupon code?" I'm going to get my answer. Or someone in my family's going to call me and be like, "I love the tea. It's really great. Can I get a discount?" So is there a code we can give them?

David Segal (00:38:36):
Big Shot 15.

Harley Finkelstein (00:38:37):
Big Shot 15. Okay.

David Segal (00:38:38):
Big Shot 15.

Harley Finkelstein (00:38:38):
Use code Big Shot 15 for 15% off our tea and tea accessories. And if you don't like the tea and you don't like the accessories, David will give you your money back. I will not. He will. That's it.

David Segal (00:38:49):
I'll give you your money back. I got you.

Harley Finkelstein (00:38:50):
Okay. All right. I won't.

Ron Shaich (00:38:52):
And the bet he and his father made were that I could operate our way out of it.

David Segal (00:38:57):
What does your dad think of it?

Ron Shaich (00:38:59):
He said to Louis's dad, when we sat down to meet on this, he'd be smarter taking his money to Vegas than investing in this business.

Harley Finkelstein (00:39:09):
[inaudible 00:39:09] gamble.

Ron Shaich (00:39:09):
And Louis's dad looked at him and goes, "You're right."

Harley Finkelstein (00:39:14):
But how was Louis at this point?

Ron Shaich (00:39:16):
Well, Louis' was 25 years.

Harley Finkelstein (00:39:18):
Okay, so you're both in your mid 20s?

Ron Shaich (00:39:19):
No, no, no.

David Segal (00:39:20):
25 years his senior.

Harley Finkelstein (00:39:21):
Oh, sorry. 25 years your senior. Okay.

Ron Shaich (00:39:22):
And Louis we stayed partners for 25 years and he ended up dying of pancreatic cancer, but it was a wonderful relationship. I describe it as this. Louis was my uncle and I was his father. And what I mean by that is Louis showed me the world. He knew the world. People loved him wherever he went. He understood real estate. He understood people.

(00:39:50):
I can remember the trips to Europe with him, to Asia. Wherever we went he undoubtedly knew the person in town who was the driving force. And on the other hand, I was his father in the sense that he needed somebody to say no. And so we used to have a joke. Louis never saw a deal he wouldn't do, Ron never saw a deal he would do.

Harley Finkelstein (00:40:13):
And somewhere in the middle was the magic.

Ron Shaich (00:40:14):
Yeah. And well, I'd say something else. One of his beauties is he was wise enough to know and understand me and provide me enough space, maybe unconditional love almost to do my thing.

David Segal (00:40:30):
I mean, he sounds like a guy who was larger than life.

Ron Shaich (00:40:33):
He was.

David Segal (00:40:33):
He must have had an ego in one sense, but it didn't sound like that clash. I mean, did he give you the room you needed?

Ron Shaich (00:40:40):
Totally. And I would say to you what mattered to him was he got to be Au Bon Pain in his community. What mattered to was I got to run the company. And I'll tell you a story that really speaks to it. At one point in the '80s one of the local banks that had wanted in on the debt. It was a very credible company. And then our comp store sales came off and they got very nervous, and it was a lot of pressure.

David Segal (00:41:10):
And just for people listening comp stores there's year over year sales increases.

Ron Shaich (00:41:13):
Yeah. It's an important measure in a retail business. And I'll never forget, and I said to Louis, I said, "Louis, you don't look worried in the least." He said, "Ron, I don't have to worry. I know you're going to worry for both of us."

Harley Finkelstein (00:41:25):
Wow, perfect.

Ron Shaich (00:41:25):
And that was really the-

Harley Finkelstein (00:41:26):
That was the relationship.

Ron Shaich (00:41:27):
Yeah, I did. And I'd say the other joke that used to be is there was one Louie, he went to lunch and it was the job of me and the other 6,000 people to dig our way out. And he was that kind of guy. Men loved him, women loved him. He was-

Harley Finkelstein (00:41:47):
Like an impresario.

Ron Shaich (00:41:49):
Less an impresario in the sense of creating, that's how I think of an impresario, more an ex-marine, an ex-frat guy with a way about him.

David Segal (00:42:07):
Charisma.

Ron Shaich (00:42:07):
A charisma. That just was so attractive.

David Segal (00:42:10):
But you come into this business, it's losing money.

Ron Shaich (00:42:12):
It's a disaster.

Harley Finkelstein (00:42:13):
Three and half million. Yeah.

David Segal (00:42:14):
Yeah, it's got huge debt. It's three stores. You have a cookie store that's doing all right, and fast-forward about 10, 12 years later, you're a public company. Take us along that tree.

Harley Finkelstein (00:42:24):
How'd that even get here?

Ron Shaich (00:42:25):
10 years later.

Harley Finkelstein (00:42:26):
10 years. Yeah.

Ron Shaich (00:42:27):
So that first step, and I'm going to jump ahead for you for a second. We're trying to go through this chronologically, but I now want to say something. When people talk about me, they often talk about what got accomplished. I mean, I've taken three companies public, Au Bon Pain, Panera, and now part of taking Cava public, I've had the best performance of any public restaurant stock bar none for the last 20 years of-

Harley Finkelstein (00:43:03):
To check that. Two x Starbucks, four x Chipotle when it comes to annualized returns.

David Segal (00:43:07):
25% for 20 years.

Harley Finkelstein (00:43:09):
It's unbelievable.

Ron Shaich (00:43:10):
And in fact, we deliver 25% returns that somebody was just telling me beat Berkshire Hathaway.

David Segal (00:43:16):
Wow.

Ron Shaich (00:43:17):
So we were the best performing restaurant stock.

Harley Finkelstein (00:43:18):
In an industry or a vertical that tradition doesn't have those type of returns.

Ron Shaich (00:43:22):
No, we delivered. And then you have the Cava IPO which has been the most successful IPO-

Harley Finkelstein (00:43:29):
Of any industry.

Ron Shaich (00:43:30):
Yeah, of any industry in the restaurant. It's up threefold since it's July IPO. But it's a substantive real company it's there and it's going to, not on speculation, but because people believe-

Harley Finkelstein (00:43:44):
What fundamentals, yeah.

Ron Shaich (00:43:45):
... it has the potential to really become an industry dominant. But that's what people talk about. But if you really want to know what I feel most proud of, what I feel most excited about, and if you look at it, it's not the outcomes, the byproducts, it's actually the work that went in and created it. And that's about learning and transformation. And there's probably four major events of learning or transformation that form the career of that arc of 37 years.

(00:44:18):
And the first was actually after we bought Au Bon Pain, and basically all I did was take care of the good folks and fire the bad folks and try to clean up the business and get some money to the bank. But about a year and a half into the Au Bon Pain experience, I would be working on a counter, which is where I learned. And I'll never forget, I had customers would walk in, they'd say, "Could I have that baguette?" And I'd say, "Sure." And they'd say, "Slice it." And you'd slice a baguette like this, like bread. And they say, "No, slice it from top to bottom." And I'd slice it from top to bottom. I'd hand them the baguette.

(00:44:57):
I didn't know what they wanted. And they'd pull out a bag from Stop & Shop or the local gourmet store, and they put roast beef and bossam on it, smoked turkey and brie. And again, you don't have to be a Harvard NBA, you start to say, "What do people want?" And it was very clear that the croissant and the bread, the baguette was not what they really wanted.

David Segal (00:45:21):
They wanted a sandwich.

Ron Shaich (00:45:22):
It was that as a means to make a sandwich. And so we began to reconceive our business not as a bakery, but as a bakery cafe in which the product itself was the things we could make from the French bread and croissant. And so very quickly, this broken down little business overnight shot up. It became a category that every developer wanted. Everybody wanted a French bakery in their mall. And it became-

Harley Finkelstein (00:45:51):
One thing that you're sort of skipping over fairly quickly, but is very, I think, meaningful, is that at this point, you own the company with your partner.

Ron Shaich (00:45:58):
I own 60% of it.

Harley Finkelstein (00:45:59):
Most of the company with your partner.

Ron Shaich (00:46:00):
And Louis had 40%.

Harley Finkelstein (00:46:01):
Okay. You're still actually at the cash register watching.

Ron Shaich (00:46:05):
I have-

Harley Finkelstein (00:46:06):
You are not working on the business, you're actually working in the business in a very deep way.

Ron Shaich (00:46:10):
I mean, at that point maybe we had seven or eight stores.

Harley Finkelstein (00:46:15):
But so most people that we know that have seven or eight stores in that sort of vein are not actually at the cash. They're kind of behind the scenes. You believe that the best way for you to understand your customer was to be in front watching them which then led you to actually see they're not actually buying baguette, they're actually buying an ingredient for something else they want which is a sandwich.

Ron Shaich (00:46:36):
I mean, the important message I want to make about these transformations that occurred over 37 years was it started with learning. And that the most powerful skill that I actually think that one can develop is empathy and the ability to listen and learn. It's really hard to stay present with that. And we're so quick to want to move to action, but I just did this book.

(00:47:03):
Part of what I talk about in this book is telling yourself the truth, knowing what matters, and then really getting it done. Well, you know what? Action doesn't matter if you're not working on the right stuff. And so if you don't develop that sort of more feminine skills, if I may say it, of really staying present, and listening, and trying to really understand what goes on, you often are going to bet on the wrong thing. And that's been a strength over a long period of time.

David Segal (00:47:31):
What does innovation mean to you? How would you describe it?

Ron Shaich (00:47:35):
Innovation is a continual process of getting closer to how you become a better competitive alternative. So I start every business we're in with what we call a concepts essence document. Every business.

Harley Finkelstein (00:47:50):
What is it called?

Ron Shaich (00:47:51):
Concepts essence. What is the theater we're putting on? What is the show? For whom? What is the thesis of why somebody should walk in there? How is it going to feel to them? What's the environment going to be like? What's the product going to be like? What are the people going to be like? How can I paint it to all the different creatives that are working on this business in a sense so that there's a sharpness to the theater that we're putting on, not a weakening or a diminishing of it? And it really is powerful for us, and we'll get to some of where that got developed.

Harley Finkelstein (00:48:28):
Well, let's get to that. I mean, you talk about you basically create this new category, it's called bakery cafe.

Ron Shaich (00:48:34):
Yes.

Harley Finkelstein (00:48:34):
It's new. Everyone wants it now. How are you now growing Au Bon Pain? How does this sort-

David Segal (00:48:41):
Not just that, just to give more of what's at stake here. Pepsi and Sarah Lee also see this category and want to be in it.

Harley Finkelstein (00:48:46):
Okay. Major players.

Ron Shaich (00:48:48):
Exactly.

Harley Finkelstein (00:48:48):
Same category, other people see it.

Ron Shaich (00:48:50):
Sarah actually bought Michel's Baguette out of county.

Harley Finkelstein (00:48:53):
Oh, interesting.

Ron Shaich (00:48:53):
And Michael calls me, he told him he could do 400 stores. He picked the phone and said, "Oh my God, I just promised him 400 stores. Can you come help me?" He didn't know how to execute it.

Harley Finkelstein (00:49:02):
So how do we get there?

Ron Shaich (00:49:03):
Well, here's the deal, between '83 and '84 when we really developed the French Bakery Cafe and '91, we had everybody and their brother come after us. Any of them had more money. They had folks with far better resumes, but their people didn't care the way our people did. We were all in this together, and we were really in an entrepreneurial sense, much like Israel our backs were to the wall.

Harley Finkelstein (00:49:33):
You had no choice but to fight.

Ron Shaich (00:49:35):
We had no choice but to win and to succeed. And so we ran better stores. We executed and operated better. I will never forget when I had the three top people in Pepsi fly off on three separate jets. I had Don Kendall, I had Wayne Christopherson.

Harley Finkelstein (00:49:52):
And you're not that big of a company though.

Ron Shaich (00:49:57):
No, no. But they had a version of us out in the West Coast, and they were competing with something called Le Petit but lingerie. And I'll never forget it. I was on the stairs of our office, and Wayne looks at me and goes, "Ron, how much do you pay in rent?" I said, "A buck foot." He says, "A buck foot a month." I said, "No, a buck foot a year." We had a special deal with the city. And he said, "Do you have the overhead to support us? If we acquired you, we'd like you to run our company." And I said, "How much overhead do you have?" He said, "Well, having visited with you we're going to have a third less on Monday." And he said to me, "We're paying 50 times the rent. We're cutting that too." I mean, we just-

Harley Finkelstein (00:50:47):
Well, they had obviously this massive backer with Pepsi, and they were just able to effectively build whatever they wanted.

David Segal (00:50:52):
It wasn't their money.

Ron Shaich (00:50:53):
It wasn't their money. And everybody was worried about their next job and what we were worried about-

Harley Finkelstein (00:50:58):
Right now.

Ron Shaich (00:50:59):
No, I think they didn't buy us because at that point, the price was x plus one. Whatever they offered, we weren't selling and we were still-

David Segal (00:51:06):
You just knew you had so much [inaudible 00:51:07].

Harley Finkelstein (00:51:07):
You wanted to be independent. You wanted to build on your own.

Ron Shaich (00:51:09):
And so they tried and they didn't go anywhere with it.

Harley Finkelstein (00:51:11):
So what happens next?

Ron Shaich (00:51:13):
Well, so if we think about this in terms of really these powerful learnings and transformation, by 1991, we had won. We owned the category, we took it public. Morgan Stanley took us public. My dad, I remember, he literally came, my mom came to the IPO. It was really quite an experience.

Harley Finkelstein (00:51:33):
It was one of the best days of my life. And I was at NCI, David was at NASDAQ. But I remember bringing the bell and looking down and seeing my family there and thinking as an entrepreneur, it's one of the greatest moments was that-

David Segal (00:51:45):
Employees are there. It was great.

Ron Shaich (00:51:46):
I must say going off on a tangent for a second, and we'll see how you all edit this, and have a chapter on this in my book. Actually, the day we went public, we were pricing it that night and we were going to go public the next morning and we were in a limo. And Louis and I-

Ron Shaich (00:52:03):
... the public the next morning. And we were in a limo, Louie and I, and I just said, "Stop the limo." I got out of the limo and I started wandering around Central Park. And to me, and it's something I feel very deeply, the IPO was, yes, it's a celebration, but it's the beginning of the journey not the end.

Harley Finkelstein (00:52:24):
Yeah, it's a graduation to the next step.

Ron Shaich (00:52:26):
Yeah. And I profoundly understood the responsibility that goes with now being a public company and broadening my shareholder base by thousands. And I understood that that responsibility was going to be unyielding and weighty and we really were going to need to deal with it. And I often think, and I'll say it to you all who've been through some of this, 90% of the people that go public lived to regret it.

David Segal (00:52:55):
Yep. We shouldn't have gone public. It was a huge mistake.

Ron Shaich (00:52:58):
Absolutely. I agree with you.

David Segal (00:52:59):
Yeah.

Ron Shaich (00:53:00):
For me, I won at it, but most of the people I talk to, I ask them, "Why are you going public?" And to me the best metaphor for an IPO, it's a little like a wedding celebration. Everybody gets excited about the wedding and the party and the event, but what really matters is the relationship.

David Segal (00:53:19):
Afterwards.

Ron Shaich (00:53:20):
The relationship afterwards and how that marriage works. And that's what you're going to remember in the decades after.

Harley Finkelstein (00:53:27):
We told our entire company on the day they went public, it was May 2015. And we called it game day and we said that basically we're graduating-

Ron Shaich (00:53:33):
Kid, I was public 25 years before you went public.

Harley Finkelstein (00:53:36):
Oh look, I'm just a kid.

Ron Shaich (00:53:36):
Yes.

Harley Finkelstein (00:53:37):
But we said, "Look, we're graduating from the minor leagues, the little leagues to the major leagues."

Ron Shaich (00:53:40):
You're playing pro ball.

Harley Finkelstein (00:53:41):
And actually now the competition is more difficult, the fans are more demanding-

David Segal (00:53:45):
The expectations are higher.

Harley Finkelstein (00:53:46):
And the exhibition are higher. And it's not just good enough to just do the work and build the company, we also have to explain ourselves.

Ron Shaich (00:53:52):
And the visibility and your ability to dance goes away. And everything you do, your competitors are seeing. And you now have all these people who you are accountable to and some are worried about your...

David Segal (00:54:07):
How did you... For most people-

Ron Shaich (00:54:09):
Yeah, we haven't gotten to this transformation two to yet.

David Segal (00:54:10):
Yeah, [inaudible 00:54:12].

Harley Finkelstein (00:54:10):
I want to get there.

Ron Shaich (00:54:11):
I don't know how you're going to get there.

David Segal (00:54:12):
But wait, we will get to all of them, I promise. But what makes Ron Shaich, Ron Shaich, is that you didn't view that as the finish line. By this point you've made some money, you're wealthy at this point by most people's standards. What drove you? What made you feel, "I'm not going to ride off into the sunset here." Like many do, perhaps even Lewis thinking that way, but yet you get out of this car at a young age and you really see what's in front of you as an even bigger challenge. At no point did you think about spiking the ball and calling a touchdown?

Ron Shaich (00:54:47):
Never. I was 28 years old. I was building... This was my life and I cared profoundly about this company. I cared profoundly about the people within it. And it was never about the money, it was always about fulfilling responsibility and actually the joy of figuring it out when the rest of the world didn't.

Harley Finkelstein (00:55:14):
And also, just frankly as a competitor, you were able to take this idea and build it and build it against massive competitors with a lot more capital, a lot more strategy.

Ron Shaich (00:55:26):
Yeah, listen. Look, I have a basic view in the world. I try really hard to separate, and encourage others to separate, the difference between means, ends and byproducts. I tell it by way of a story. A friend of mine is a type one diabetic. His mission in life is to stay alive as long as you and I. But he can't make that happen, it's a byproduct. So what's his end? To keep his blood sugar between 80 and 180. If he does that, he's going to live. What's his means? Diet, exercise and insulin control. Business is the same thing. Value creation - public company, private company, whatever - is a byproduct. You don't make value creation. You don't make a value happen.

Harley Finkelstein (00:56:08):
Yeah, there's some things you have to do.

Ron Shaich (00:56:09):
What is the end? Being a better competitive alternative for some target consumer. If you do that in a powerful way, the byproduct will be value creation. And my entire professional life is spent on the means, the art, of doing the things that will deliver that end a better competitive alternative. Which is why we'll sit down and literally write, "What does it mean to be a better competitive alternative? What is the vision for that? What is the document? What are the initiatives that we're betting on this year and next year to get us there?" And again, it all comes out of a view I have, I call it a pre-mortem.

Harley Finkelstein (00:56:53):
As opposed to a post-mortem?

Ron Shaich (00:56:55):
Yeah. And I'll explain to you what I mean. I often have found that running a business, like running a society, is very much akin to running a life. And there are lessons I learned in my life that I bring to my business, lessons I learned in business that I bring to my life. And one of the most powerful lessons for me in my life, was watching both my mom and dad pass away. My mom passed away right after the 10th anniversary of Au Bon Pain in the early nineties.

Harley Finkelstein (00:57:24):
Was she there for the IPO?

Ron Shaich (00:57:25):
Yes.

Harley Finkelstein (00:57:26):
Okay.

Ron Shaich (00:57:26):
But then passed away fairly quickly, and my dad half a decade or so after that. And what I discovered, what I learned watching them, is unless you have a traumatic illness where you die very quickly, you have the opportunity often on your deathbed to have a judgment day. And I can't tell you there's a judgment day up there that's for each of our own spiritual... But I watched my parents go through their own judgment day, and one of my parents was much more at peace with their lives than my other parent. And it was very clear to me the time to have that judgment day was not in the ninth inning with two outs as you're on your deathbed. The time to do it in all of our lives is in the seventh inning, the fifth inning, the third inning, while you still have an opportunity to create what it is you're going to respect on your deathbed.

(00:58:21):
And it was from that understanding, I then began to personally... This began 30 years ago, sit down every Christmas, my birthday is December 30th, take that week, and ask myself, "Where do I want to be in five years in all of my core relationships?" My relationship with my body and my health. My relationship with my work and what I was doing every day. My relationship with my family and those people I cared about. And my own spirituality, my relationship with my own God and what it meant to be a Jew. How did I feel about that? And I'd write down literally what my five-year objectives were. And then I would take that and turn that into basically steps or projects to get there. And then every three months I'd have a meeting with myself and say, "How am I doing on these projects?" And I usually got about 80% of it done.

(00:59:18):
I then took that and I began to apply that in business. And every one of my businesses begins with an end in mind. What it is we're going to respect when we get there?

Harley Finkelstein (00:59:27):
And then you reverse engineer back.

Ron Shaich (00:59:29):
Yeah, and we then reverse engineer. We break it down into key initiatives and we manage that business with clear accountabilities, with literally quarterly updates.

Harley Finkelstein (00:59:41):
But I'm curious about something because I think it's something that I struggle with, David does too I know, which is this concept of balance.

Ron Shaich (00:59:51):
Balance? There's no balance in the world.

Harley Finkelstein (00:59:52):
That's right-

Ron Shaich (00:59:54):
Excuse me. Let me share with you a thought. There is no such thing as balance, all there are are trade-offs. And one of the greatest falsehoods of my generation was to believe you could have it all. You can't. You just need to be clear what you're choosing, what you're giving up, and what you're willing to do.

Harley Finkelstein (01:00:10):
So when you look at that, I want to go back to what happened post IPO.

Ron Shaich (01:00:13):
Still haven't gotten to the story yet.

Harley Finkelstein (01:00:15):
It's exactly one.

Ron Shaich (01:00:15):
Transformation point number 2.

David Segal (01:00:16):
That's good. Yeah.

Harley Finkelstein (01:00:17):
Let's quickly talk about this balance thing. You make this list, you go through it, family, business, health. Are you allocating things? Is there a lever of right now business matters more? I just have kids, family matters more. How do you think about those levers?

Ron Shaich (01:00:36):
Well, I would start and say to you that each of those four had powerful import at different points along the journey. I never walked away from any of them, and I tried to basically keep those balls in the air. What did that mean in real terms? To me, this business, my business, was a third child. I have two children. My kids know there was a third child, and they understood my love and devotion to that.

David Segal (01:01:09):
Have a sibling rivalry with the third child?

Ron Shaich (01:01:10):
It was a joke. They grew up with mother bread and they understood it. And really importantly, they didn't have a sibling rivalry, they had a shared love and affection. My son worked in these stores, he understood them, to this day we share that. My daughter in similar ways understood it. Because for me it was an act of love, it wasn't a burden that I went to. It wasn't a job, it was what I did, and I needed to nurture and care for this business. Having said that, I then organized my life and the choices I made were work, and I was committed to it, and my family. And along the way, I realized I wasn't taking care of my body the right way, I began to add exercise and diet. But that didn't come till later because I sacrificed that.

Harley Finkelstein (01:02:05):
For a while, yeah.

Ron Shaich (01:02:05):
Yeah.

David Segal (01:02:06):
So you're not doing this pre-mortem once, you're doing it every year.

Ron Shaich (01:02:08):
Every year.

David Segal (01:02:09):
And evolving it-

Harley Finkelstein (01:02:10):
And then every three months doing a check-in for it.

David Segal (01:02:11):
Right.

Ron Shaich (01:02:12):
And doing a check-in on the projects to get to where I want to.

Harley Finkelstein (01:02:14):
Yes, yeah.

Ron Shaich (01:02:15):
But in my fifties... I wasn't an athlete. My fifties, I realized I didn't respect my own body, and I decided I needed to do that to respect myself. And I ended up hiring a trainer, a Ukrainian trainer, who came to my house at 5:30 in the morning, three days a week. My favorite part of seeing the trainer was saying goodbye.

Harley Finkelstein (01:02:38):
Yeah, of course.

Ron Shaich (01:02:38):
And I did it half asleep.

Harley Finkelstein (01:02:40):
And he kicked your butt.

Ron Shaich (01:02:42):
I tried to get him talking.

Harley Finkelstein (01:02:43):
Okay.

Ron Shaich (01:02:43):
So I managed to go through his divorce, almost another marriage, his kids.

Harley Finkelstein (01:02:48):
The more talking you did, [inaudible 01:02:50].

Ron Shaich (01:02:49):
Yeah, the more I.... I could always engage him. But I knew if I showed up, he was going to work me out.

Harley Finkelstein (01:02:55):
Let's go back to you post-IPO. Let's go to back to the business. So third transformation. So...

David Segal (01:03:00):
Yeah, we're on the second.

Ron Shaich (01:03:00):
We haven't gotten to second yet.

Harley Finkelstein (01:03:02):
Okay. So let's go to the second. So you're now publicly traded.

Ron Shaich (01:03:06):
Yeah.

Harley Finkelstein (01:03:06):
How many stores do you have?

Ron Shaich (01:03:07):
100, 150.

Harley Finkelstein (01:03:08):
150 stores under the Au Bon Pain banner.

Ron Shaich (01:03:12):
Yes.

Harley Finkelstein (01:03:12):
You're learning how to be a public company leader and manager.

Ron Shaich (01:03:17):
Yes.

Harley Finkelstein (01:03:17):
What happens next?

Ron Shaich (01:03:19):
Well, I would say to you, one of the real clarifying points was that I began to recognize that Au Bon Pain had limits and it had limited growth. And I ended up-

Harley Finkelstein (01:03:32):
What were the limits?

Ron Shaich (01:03:34):
That Au Bon Pain was organically at its best in urban environments. It didn't work in suburbia, it didn't work in malls.

Harley Finkelstein (01:03:42):
Okay.

Ron Shaich (01:03:42):
And-

David Segal (01:03:43):
You're running out of right space.

Ron Shaich (01:03:44):
Yeah, pushing it beyond what was its right space had risk to it. And I ended up building a manufacturing business. I ended up saying if Au Bon Pain was the best in the United States that I didn't see urban feeding, it had an opportunity in international markets. We took it to Asia, to South America.

Harley Finkelstein (01:04:06):
Direct or through franchise or through licensing?

Ron Shaich (01:04:08):
We licensed internationally.

Harley Finkelstein (01:04:11):
Okay.

Ron Shaich (01:04:12):
And then fourth, I bought a 19 store chain in St. Louis called the St. Louis Bread Company, which I viewed at that time as maybe 300 stores. But if Au Bon Pain was going to be the urban concept, this was going to be the suburban concept.

Harley Finkelstein (01:04:28):
The St. Louis Bread Company?

Ron Shaich (01:04:29):
Yeah. It's a whole other story about this acquisition, but I bought this company at that time for $23 million.

David Segal (01:04:36):
Wait, we got to hear the story about the acquisition. This is the key... Tell us about how you acquired... You have 150 stores and you go find this random company in St. Louis.

Ron Shaich (01:04:45):
No, no. It never works that way. So what happened was I would often get calls and people wanted help. I still do. And I'm often willing to talk to people. And a couple of guys in St. Louis call me up and say they've got 20 stores, they're thinking about franchising, and would I come meet with them? I met with them in New York. I spent four hours trying to convince them they shouldn't franchise, that it's a whole other business. That summer, they invited me out to St. Louis. I came and I was blown away. They were doing volumes almost as high as we were doing in real estate that was half the price. They had 19 stores in the St. Louis Market, and there was an energy and power in their stores. Consumers were lined up at 6:30AM.

David Segal (01:05:32):
Wow.

Ron Shaich (01:05:33):
And I thought to myself, "Wow, I want to buy this. I want to take this."

David Segal (01:05:37):
But why not go back and say, "Wow, we're going to apply those learnings and open Au Bon Pain suburban," which is what many CEOs would do?

Ron Shaich (01:05:45):
Well, it gets more complicated because we ended up changing it all. But the reason was, is these stores are organic holes. Just like if I were to come along and say, "I'm going to change you, David, into Harley," it ain't going to work.

David Segal (01:06:00):
Right.

Ron Shaich (01:06:00):
Right? You are different. You have a different DNA, a different perspective. You look different, you feel different. He's bigger than you, I don't want to say anything, but you got a physical size. Au Bon Pain was a different size, it had a different place in the world. And so simply mimicking it wasn't going to work.

David Segal (01:06:22):
Doesn't work.

Ron Shaich (01:06:22):
And I viewed this as an alternative growth vehicle.

(01:06:26):
Any rate-

David Segal (01:06:26):
So you buy this company $23 million you said?

Ron Shaich (01:06:28):
Yeah, $23 million.

David Segal (01:06:29):
And what's your market cap at this point?

Ron Shaich (01:06:32):
$300 million.

Harley Finkelstein (01:06:33):
Okay. So it's not a small acquisition.

Ron Shaich (01:06:34):
Oh, but it's not huge either. And I bought it on an earnout, and I let them run it for two years. But during those two years, Au Bon Pain was becoming a little more pedestrian, and I began to search for the deeper trends. One of the things that I think are most powerful about really successful business people, and just generally living life, is I work really hard to listen. And I work really hard to figure out how do I separate the wheat from the chaff? What matters and what doesn't?

(01:07:06):
And increasingly, if I may go off on you for a second, we live in a world where we're so responsive to social media, to what somebody said yesterday. None of that matters. What really is the search in life, is to figure out those deeper trends that are going to last and evolve over a long period of time. And that's been part of what I've tried to do in business.

(01:07:29):
And in the mid-nineties, I was beginning to feel change in a consumer marketplace. And I, and my strategic consultant, Dwight Jewson, and my head of R&D, Scott Davis, we spent, I don't know, a year and a half almost, on the road two out of every four weeks, traveling to look at bakeries and cafes on the East Coast and the West Coast. And it took me a while, but I began to understand something, that probably one out of three consumers in the marketplace were holding their noses when they went into fast food. They wanted something quick and they didn't want to sit down for fine dining. And those were the only alternatives, either commercial processed food or fine dining.

Harley Finkelstein (01:08:15):
Quick or good, pick one.

Ron Shaich (01:08:16):
Yeah, and they'd drive into the thruway and they...

David Segal (01:08:22):
[inaudible 01:08:22] heavy crap, and...

Ron Shaich (01:08:23):
Yeah, but they didn't want it.

David Segal (01:08:25):
Yeah, right.

Ron Shaich (01:08:25):
And we began to think about it and we say, "You know, there are places that are doing it... If we could create a place in which people respected the food, in which the associates that worked there actually respected the folks that were their guests, if we could create environments that engage people, we could change the currency." The currency of fast food was essentially a lot of food for not a lot of money. We said we could change it to providing an experience that elevated your sense of self, elevated your sense of self-esteem, and brought you a sense of pride. Now that ideology became what is now called fast casual, which is now a $300 billion segment.

Harley Finkelstein (01:09:13):
$300 billion?

Ron Shaich (01:09:13):
Billion.

Harley Finkelstein (01:09:14):
Yes.

Ron Shaich (01:09:14):
...segment of the restaurant industry.

Harley Finkelstein (01:09:16):
And it didn't exist at all.

Ron Shaich (01:09:17):
Didn't exist.

Harley Finkelstein (01:09:17):
Wow.

Ron Shaich (01:09:17):
Everybody said the only choice was fine dining and fast food, and like so much in life, nothing is proven until it's done. And when you're in the middle of it, nobody believes it.

David Segal (01:09:28):
Well, you had a company that's a $300 million market cap, and a $20 million company, and you effectively said, "We're going to sell off the cash cow that has all the market cap and bet the farm on this small St. Louis Company-"

Ron Shaich (01:09:41):
Well, we're getting there. You're on third transition.

David Segal (01:09:43):
Okay.

Ron Shaich (01:09:44):
You're ahead of me. Okay.

David Segal (01:09:44):
So that didn't come right away?

Ron Shaich (01:09:45):
No, no. This was the nineties.

Harley Finkelstein (01:09:47):
So you conceptualize what will become fast casual, global.

Ron Shaich (01:09:51):
Well, here's the deal. Just keep thinking, learning, and then action.

Harley Finkelstein (01:09:54):
Okay.

Ron Shaich (01:09:55):
Learning and then transformation. So the learning was this powerful theme or trend.

(01:10:03):
I'll go off on it for just another second. If you put it in terms, it's what I call decommodification or drive for specialness. Post World War II, every product in North America was local, you fast-forward it to the early nineties, every consumer category had been commodified. Usually it was an oligopoly. Two people, three different organizations, dominated the business. In that kind of context, it became advertising dollars, shelf space, that was how competition played out.

(01:10:35):
Consumers of my generation were waking up in the early nineties and were saying, "You know what? I want to feel special in a world in which I don't." And again, I'm searching always for the generalization. And I began to look around and say, "Look it, you can take any consumer category, beer, coffee, soft drinks." You had these oligopolies. In beer you had Miller and Anheuser-Busch controlling 90% plus market share. Somebody woke up, a good friend of mine in Boston, Jim Cook-

David Segal (01:11:05):
Sam Adams...

Ron Shaich (01:11:06):
Sam Adams, right? He did it the way his grandparents did it with a whole different approach to brewing. And he said that specialty product was powerful. You saw the same thing playing out in coffee. Folgers was what we did at a Friday night dinner back then. If you go forward today-

Harley Finkelstein (01:11:26):
Wow. If you gave someone Folgers at a Friday night dinner, they'd tell you, "You obviously don't care about me."

Ron Shaich (01:11:30):
Excuse me if I don't pull out my $3,000 espresso machine and make you a drink, I'm somehow insulting you.

Harley Finkelstein (01:11:37):
Yeah. That's right.

Ron Shaich (01:11:39):
Folgers and Maxwell House became specialty coffee. Right? We saw the same thing with soft drinks. Coke and Pepsi dominated the market, walk into any 7-Eleven today, you're going to see 400 brands, that market fragmented.

David Segal (01:11:51):
Now there's just distribution companies.

Ron Shaich (01:11:52):
Yeah. It became clear to me the same thing was going to happen in food, in restaurants, and then ultimately it was going to happen with bakery. And so what did that mean? Post World War II, fast food was special. You bring it up to 1990, they become self-service gasoline stations for the human body. There's 60,000 drive-throughs. 60% of the volume is going through the drive-through it's basically selling nutritional cocaine. It's four o'clock, I haven't eaten. How do I most quickly inject something into my system? And so we began to see that framework and understand that there was going to be an opportunity in specialty food as there was in specialty coffee, specialty...

Harley Finkelstein (01:12:41):
Soft drinks.

Ron Shaich (01:12:41):
Soft drinks and beer.

Harley Finkelstein (01:12:44):
So that's the learning.

Ron Shaich (01:12:45):
Yeah.

Harley Finkelstein (01:12:45):
Where's the action come in?

Ron Shaich (01:12:46):
Well, and the learning, that ideology, became fast casual, which we did, Starbucks did, later Steve Ells did. Today we still dominate a large-

David Segal (01:12:58):
And [inaudible 01:12:59] is doing.

Ron Shaich (01:12:59):
Yeah. Well-

David Segal (01:13:00):
Within a vertical.

Ron Shaich (01:13:01):
That's yet another iteration, which we can get to, which is the next turning of the wheel.

(01:13:07):
But at any rate, so we then took Panera Bread... We then took St. Louis Bread Company, this company we had, and we studied it for two more years, and we then wrote a concept essence for it and changed everything about it. We changed the physical environment, we changed the product line. We took basically a sandwich shop that was rooted in bread, and we added a breakfast business rooted in sourdough bagels. And then we changed the environment to really make it a very comfortable gathering place. And each time we did it, we popped the volume.

David Segal (01:13:43):
So-

Ron Shaich (01:13:44):
Let me hang a second, David.

(01:13:46):
When we added breakfast and sourdough bagels, we went from a million dollars a unit to a million two-fifty a unit. Then when I added the gathering place, I popped the volume up to a million seven-fifty. And now this vehicle was powerful.

David Segal (01:13:59):
So Panera is not just simply St. Louis Bread Company with a new sign, it's almost like you took all your learnings at Au Bon Pain, all your learnings at a smaller chain that was working in the suburbs with St. Louis Bread Company, and you created this entirely new concept that was-

Ron Shaich (01:14:17):
You're close. I would argue we understood what the marketplace opportunity was through these two years of really being on the road and this development of the ideology of what became fast casual. And then we converted everything in St. Louis Bread Company to this new model called Panera, and then went back and did it in St. Louis. And we left some stores there with the St. Louis Bread company name, but the Panera that we created was fundamentally different to-

Harley Finkelstein (01:14:49):
What was Panera? What's that name? What is that brand?

Ron Shaich (01:14:51):
Well, as we started to grow it, we began to recognize that St. Louis was most identified with Clydesdale horses and beer, and that it wasn't the name that we wanted. So I don't have a cousin Joey Panera, we literally made up the name. It's an empty vessel to put the personality we wanted into that brand and to allow us to be who we wanted it to be.

David Segal (01:15:18):
Ron, we-

Ron Shaich (01:15:18):
We've still done only transition two.

David Segal (01:15:20):
Yeah, we got two-

Harley Finkelstein (01:15:20):
[inaudible 01:15:22].

David Segal (01:15:21):
We got 15 minutes, so let's go to transition three, yeah.

Ron Shaich (01:15:24):
You have how many minutes?

Harley Finkelstein (01:15:24):
15.

Ron Shaich (01:15:26):
Oh, good luck guys.

Harley Finkelstein (01:15:27):
I know.

David Segal (01:15:27):
Yeah.

Ron Shaich (01:15:29):
Okay. We started building Panera Bread. By 1998 I'm down and I'm looking around and I've got-

David Segal (01:15:40):
Down how?

Ron Shaich (01:15:42):
I'm running a public company. I've got four divisions. I've got professional managers in every division, and everybody's fighting.

Harley Finkelstein (01:15:50):
I know, but you're killing it. From an objective perspective, you're the man. No?

Ron Shaich (01:15:54):
Yes, yes. But in some ways. But the reality is-

David Segal (01:15:59):
You're a referee constantly.

Ron Shaich (01:16:00):
Yeah. And I just felt like we could run so many of these businesses so much better. And it was tough, the stock prices stayed flat for two and a half, three years. Au Bon Pain was not quite what it had once been, didn't have that cachet.

(01:16:20):
And I had, again, a powerful learning. I'm on a beach in the Caribbean where I have a home. I was with a friend and I was lamenting this friend, this situation I was in, and I said to my friend, "You know this thing, Panera Bread?" We now had at that point 90 restaurants, it was the third largest of our divisions. And I looked at this friend, I said, "This business, I can tell you, has the potential to be a nationally dominant brand." And for every hundred people that talk about a nationally dominant brand, one ever makes it. It's really hard. I said, "This has that potential."

(01:16:56):
How do I know it? I can watch the consistency of the sales volumes from Portland Maine to Portland Oregon. I could feel it when I walked into a store and watched how people reacted to it. They got excited. And I said, "This has that power." And I said, "We're going to screw it up. This brand doesn't have enough capital. It probably doesn't have the right leadership. It's got people who know how to run a large company, not people who know how to grow something."

(01:17:21):
And my friend looked at me and said, "Ron, what would you do if Panera was the name of the public company? If Panera owned Au Bon Pain, Au Bon Pain International, Au Bon Pain Manufacturing, what would you do?" I looked at her and I said, "If it were me, I would monetize every other asset because the golden gem is Panera. I'd sell every other asset. I'd take the very best people, and I'd go down there myself and I'd make this happen. Because getting there is really the prize."

Harley Finkelstein (01:17:54):
And the vehicle to take you there fastest, most effectively, was going to be Panera, not Au Bon Pain.

Ron Shaich (01:18:01):
Well, it wasn't...

David Segal (01:18:03):
Not Au Bon Pain.

Ron Shaich (01:18:03):
It wasn't the-

Harley Finkelstein (01:18:04):
It was the biggest opportunity. It was a unique opportunity.

Ron Shaich (01:18:06):
It was the opportunity that needed to be protected.

David Segal (01:18:08):
Right.

Ron Shaich (01:18:09):
So often there are all these considerations. It seems crazy. You're going to sell the name of the company, the name of the brand, the whole thing.

David Segal (01:18:19):
Most of the profit at that point, right?

Ron Shaich (01:18:21):
Yeah. This was smaller.

David Segal (01:18:22):
Yeah.

Harley Finkelstein (01:18:23):
Yeah.

Ron Shaich (01:18:23):
I said, but this had that potential, and if we didn't care for it the right way, feed it the right way, we were going to destroy it. So protecting that opportunity, I could feel it, was really job number one. So again, that was the learning.

David Segal (01:18:39):
Mm-hmm.

Ron Shaich (01:18:39):
The action. I came back and I thought about it for two months and I said, I'm going to go do this. I announced it to my board. They were not pleased. It was a bet your job kind of thing. They-

Harley Finkelstein (01:18:50):
It feels like a side quest on a main quest.

Ron Shaich (01:18:52):
Yeah. Well, they had signed on to be part of Au Bon Pain.

Harley Finkelstein (01:18:55):
That's right.

Ron Shaich (01:18:55):
Yeah. Right, that was-

Harley Finkelstein (01:18:56):
Now founder, their CEO is busy off with this St. Louis thing.

Ron Shaich (01:19:00):
Yeah, and he's going to go... Yes, exactly.

David Segal (01:19:03):
He's willing to move there and uproot his family and go down there.

Ron Shaich (01:19:06):
Well, to be clear, this was really tough stuff.

David Segal (01:19:10):
Yeah.

Ron Shaich (01:19:11):
If anybody's ever sold anything, it led to the worst year and a half of my life. Au Bon Pain... Yeah, you lived it, David.

David Segal (01:19:18):
Yeah, totally.

Ron Shaich (01:19:19):
Au Bon Pain was my first son.

David Segal (01:19:21):
Yeah.

Ron Shaich (01:19:21):
I loved it. I loved the people, and every one of them was getting sold. Now the good news is once their non-competes were over, they came back, but nonetheless, it was a horrible year. It was blood in the streets. Everybody had a knife out. Everybody was jockeying for position. In fact, Louis Kane, my partner who had pancreatic cancer, but only and he knew that, he made a decision that to make this deal work he would go with the sale of Au Bon Pain, and then died two years later.

David Segal (01:19:50):
Wow.

Harley Finkelstein (01:19:50):
He had your back.

Ron Shaich (01:19:52):
Yeah, he had my back and he freed me up to take Panera and to sell it off. So we ended up in 99 with a perfectly pristine balance sheet, a bunch of cash and about 180 Panera stores. I just want to say something to people, and really important. When you're in the middle of this, it never is for sure. It's so much pain. There was almost any day you could have convinced me not to do this. It was so hard.

David Segal (01:20:30):
Some days you probably convinced yourself not to-

Ron Shaich (01:20:32):
Yeah. The truth of the matter is nothing is proven until it's done. One of the most difficult mantles of leadership is when you're saying to thousands of people, we're going this way, and yet you really can't be sure. We're going to talk about that in a minute when we talk about transformation.

(01:20:54):
I got through it. I did it. Along the way, you could have convinced me to sell the company maybe. It was a lot of that kind of talk. I got through it and we ended up with these 180 stores. And off we went with Panera. Between 2000 and 2009, we took that thing up from 180 stores to like 1500.

David Segal (01:21:13):
Which is mind-blowing.

Harley Finkelstein (01:21:15):
It's mind-blowing.

David Segal (01:21:16):
As a retailer who opened 30 stores a year, which felt like a ton. You guys were opening a store every three days, which anybody listening-

Ron Shaich (01:21:24):
At one point we opened, I think one year a 125, 150... Yes.

David Segal (01:21:27):
Yeah.

Ron Shaich (01:21:27):
We partially franchised. We owned half the stores, the other-

David Segal (01:21:31):
Still, you're building.

Ron Shaich (01:21:32):
Yeah, but I would say to you, this thing worked. We continued to iterate and evolve and make changes within that vision we had. We worked, and there's a lot more to the story I won't take you through. By 2009, this thing had already hit its stride.

Harley Finkelstein (01:21:54):
Just to repeat, you had 1200 stores by then?

Ron Shaich (01:21:57):
1500 maybe.

Harley Finkelstein (01:21:58):
1500 stores.

David Segal (01:22:00):
There was nobody looking at you saying, Ron, you're going too fast. In business school, they'd be like, slow and steady. Stay focused.

Ron Shaich (01:22:05):
Whoa, whoa, whoa. I was slow and steady.

David Segal (01:22:07):
Yeah

Ron Shaich (01:22:07):
I was slow and steady. I franchised. So I had 20 different groups around the country opening five to 10 stores a year, and we were opening company stores. So I always am about making sure the ground is solid and don't getting ahead of your skis. When I build companies today, people always get ahead of their skis. It's about this is not a sprint. It's a marathon. We knew we had something and we stayed committed to that concept essence. We kept iterating.

(01:22:42):
At any rate, so 2009 I actually stepped down as CEO. I was approached by people in the Obama administration. I was very excited by what Obama was bringing to the country. I have this political side still. One thing led to another, I stepped down. I helped form a group called No Labels, which is about reducing the hyper-partisanship and polarization in the United States. I also created something called Panera Cares, which is another thing. These are cafes in which there are no set prices. We put our name on the door.

Harley Finkelstein (01:23:15):
I think it's literally it's pay what you can.

Ron Shaich (01:23:18):
Pay what you can.

Harley Finkelstein (01:23:19):
That's an unbelievable concept.

Ron Shaich (01:23:20):
Well, interestingly, we opened five of them. We serve tens of millions of people through them. If you felt you needed it, you could take what you wanted. If you wanted to pay it forward, you're more than welcome to leave a little bit more. We trusted people to do the right thing. You know what the amazing thing is? Over five stores, we were in Boston, Portland, Oregon, Chicago Detroit, and St. Louis, on average, people left 80% of the retail prices.

David Segal (01:23:52):
Wow.

Ron Shaich (01:23:53):
People did the right thing and it was a powerful experiment in human nature and what people are about.

David Segal (01:23:59):
Incredible.

Ron Shaich (01:23:59):
Ultimately, after I sold it, the conclusion was made. This isn't the best way to help homeless, but it was a powerful, powerful endeavor.

Harley Finkelstein (01:24:08):
So you decided in 2009 you get inspired by the Obama-

Ron Shaich (01:24:12):
Yeah, and I want to take-

David Segal (01:24:13):
Resigned.

Ron Shaich (01:24:14):
Yeah. Well, it took me nine months to leave. I wanted to take what I had learned. One of the things that was so powerful about Panera was we thought long-term, one of the greatest strengths in a company, particularly if you have dual class of stock, you have some vote, is to be able to think long-term. Because all of my competition was thinking short-term, and when you think short-term, you lose about 80% of what is the optionality in terms of building an enterprise.

(01:24:41):
Any rate, so I stepped down. I'm the executive chairman. Still the largest shareholder. I'm running around the country doing M&A for Panera, doing political work, helping organize the No Labels. I spent literally the month after I stepped down as CEO working a counter, creating the first Panera Cares. Anyway, I'm having fun, but a year into it, I come back from a business trip and an acquisition on the West coast. I sit down on a computer and I basically wrote a vision for how I would screw with Panera if I weren't part of Panera. How would I compete with this company-

Harley Finkelstein (01:25:20):
How do you disrupt yourself basically.

Ron Shaich (01:25:21):
Yeah, and I basically-

Harley Finkelstein (01:25:23):
Great...

Ron Shaich (01:25:24):
I had certain experiences, and our volumes were at such a high level, we weren't able to keep up with it. I basically called for digital access, which didn't exist in the United States, but I had had certain experiences that from my own life that led me to it. I called for loyalty, which again, wasn't being done in our industry. It was being done by Tesco in the UK and then Kroger had brought it over to their-

David Segal (01:25:48):
Customer loyalty programs.

Ron Shaich (01:25:49):
Yes, customer loyalty programs. I called for clean food, which was a natural step in Panera's evolution and I called for omnichannel. I've shared this with the guy who would become my CEO, my very dear friend Bill Moreton. We'd worked together for 20 years. Bill said, "Wow, this is powerful. Would you go work on it?" A year later, the executive chairman is working 80 hours a week building this prototype of how you integrate technology and clean food and the whole thing.

Harley Finkelstein (01:26:22):
So like another Godfather reference. First, I thought I was out and they pull me back in.

David Segal (01:26:25):
Yeah.

Ron Shaich (01:26:26):
Well, I pulled myself back in. I loved it.

David Segal (01:26:28):
Yeah.

Harley Finkelstein (01:26:28):
Yeah.

David Segal (01:26:30):
I looked at running for office. I felt there was nothing more powerful than being in a business and the ability to impact-

Harley Finkelstein (01:26:35):
That was your way to affect change.

Ron Shaich (01:26:37):
Yeah, and in fact, we did through many, many iterations. Bill then came to me and said, look, he had a problem. He couldn't travel and there was something going on in his family. We fought over for a while. I didn't want to come back, but ultimately we became co-CEOs. Then I came back as CEO. He became executive vice chairman. We just swapped positions and I was right back in as CEO with a mission of transforming the company yet again.

David Segal (01:27:05):
Yeah.

Ron Shaich (01:27:06):
I took those initiatives and I then began to apply them. What I didn't understand is what happens in transformation. I had to change the entire senior management team. When you're going through transformation, and every company does, I don't know if yours has yet, every company ultimately has to. It's tough, because all the rewards are trailing. So when you're in the middle of paying, the rewards are down because they're based on what happened yesterday. The toughest and most important work is done during transformation. I cannot tell you how painful it was. Not only did we change the organization, I ended up having to change the concept essence document.

David Segal (01:27:46):
What was the most painful?

Ron Shaich (01:27:50):
The burden of responsibility of a sense that I am taking billions of dollars of investors who believe in me, hundreds of thousands of employees who believe in me, vendors and suppliers for whom this was the largest parts of their business, and I'm saying to them, we need to go that way. Follow me. I would get up and I'd make a speech to 5,000 people, and I'd be in the middle of it and I'd go, is this real? Am I going to get there? Vince Lombardi had a great quote. He said he never lost the game. He just ran out of time. AI never worried that this was right where I was going.

Harley Finkelstein (01:28:27):
You knew it was.

Ron Shaich (01:28:28):
Yeah. I definitely knew, but I didn't know if I had enough time in a public company. Everybody wanted to see the results and I had 2000 stores. If you converted one a day, that's seven years.

Harley Finkelstein (01:28:39):
Yeah.

David Segal (01:28:39):
Right.

Ron Shaich (01:28:39):
At any rate, it all manifested itself in two stories.

David Segal (01:28:44):
So that was transformation number three?

Ron Shaich (01:28:46):
Yeah. That was transformation number four and there's probably transformation five coming. At any rate, it manifested itself. I can just remember, there were points. I had activist investors attack me along the way. One of them became my partner today.

Harley Finkelstein (01:29:04):
Wow.

Ron Shaich (01:29:05):
Which is -

Harley Finkelstein (01:29:05):
You really turned that person. Wow.

Ron Shaich (01:29:06):
Yeah. Actually, the interesting thing was he had some good ideas, but I couldn't tell anybody. So I just stole him. I used him as a foil, as Rahm Emanuel said, "A crisis is a terrible thing to waste." I got everybody motivated. I can remember just driving out in Storrow Drive in Boston and just saying to myself, "My God, I have all these people counting on me. I don't want to let them down. It would just be easier if I got hit by a truck." It's not a suicide wish. It's not depression. It's that sense of the burden of responsibility. When you are running a business, when you really care, and this is the toughest part of it, it's with you in the shower. It's with you when you're in bed at night. It's with you when you're on vacation. It owns you. You don't own it. If you really care, that burden of responsibility is powerful.

(01:30:02):
I can remember one night. My CFO, who had been a investment banker and had been desperate to get this job, I had hired him. He was there about a year and a half. He thought he should be COO. The company was bouncing as we were going through the transformation and he quit. He gave me basically two weeks notice. I've never been dealt with like that. I got a call. I was really beat up that day, and I had to go to some event, and I got a call from my daughter who was about an hour out of town with Nancy, my ex-wife, and my son. They were up on the north shore of Massachusetts. Emma said, "Daddy, will you come and put me to sleep?" I said, "Emma, I'm so beat. I've had a horrible day. I can't do it." I thought about it for five minutes and said, "Emma, I'm going to come up."

(01:30:58):
I drove up and got there about nine, laid down with her, and she said, "Daddy, I had the worst day. I had such a terrible day." I remember looking at her saying, "Emma, the beautiful thing about life is you're going to lay down and you're going to go to sleep at night, tonight, and you're going to wake up in the morning and the sun is going to be shining and you have another opportunity to go at it and get it right yet again." I drove home from there. I didn't stay overnight and it really struck me as I was driving home. I was talking not to her, but to me, and that is really what the experience is. There is nothing more painful than that burden of going through transformation when the world wants certainty and everything is uncertain, including time in a public company.

David Segal (01:31:46):
Ron, we have a few questions we ask every guest, but I'd actually like to change one of them for you. What do you think success is?

Ron Shaich (01:31:51):
We got to get to number five, buddy.

David Segal (01:31:53):
Five? You said four. Now it's five.

Ron Shaich (01:31:55):
I know-

Harley Finkelstein (01:31:55):
We have 10 minutes. We got to go.

Ron Shaich (01:31:57):
All right. I do to.

David Segal (01:31:59):
What is success?

Ron Shaich (01:32:05):
Self respect. To me, success is knowing you did great work. You figured out when the rest of the world didn't. You stuck with it when the rest of the world. You took on the tough stuff and you did it well.

Harley Finkelstein (01:32:24):
I love that. One of the things we also like to talk about is concept of the show is Jewish entrepreneurship. We are-

Ron Shaich (01:32:32):
We haven't talked about the last five years yet, Act Three.

David Segal (01:32:34):
Well, Act Three is pretty impressive too.

Harley Finkelstein (01:32:37):
By the way, just to foreshadow a little bit, you end up selling the company for $7 billion.

Ron Shaich (01:32:42):
You're selling your company?

Harley Finkelstein (01:32:42):
No, you're selling your company. Eventually, your company gets sold for $7 billion, right?

Ron Shaich (01:32:47):
Yeah. We haven't talked about that either.

Harley Finkelstein (01:32:49):
That there's a lot more to cover, but we talk about chutzpah and this Jewish plight, this character that Jews have, which is so unique. We are 50 million people in a world with 7 billion people, yet we have disproportionately built industries and communities and companies. What is it in your view about Jewish entrepreneurs in general, or just Jews in general, that have made us so uniquely ambitious. I won't even say successful, but we just drive a certain way. What's the story?

Ron Shaich (01:33:18):
Well, I think there's a historic cultural perspective. We've been merchants. We've been traders for centuries. In the diaspora, that's what we did as a way of being. We've also been the people of the book. I think so much of it is rooted in trying to make sense of the world to think and to really, if I may say, our whole [inaudible 01:33:50] process is to challenge and to ask questions. I think those are the very things that lead to progress, whether you're running a business organization or a society. I think it leads to learning and growth. So I think-

Harley Finkelstein (01:34:08):
It sounds like your strategy, which is learning first, action second. I think it's deeply in it as well. You had this quote that I read, as we were doing our research, which was that, "Entrepreneurs are not capitalists. They're opportunists."

Ron Shaich (01:34:22):
Mm-hmm.

Harley Finkelstein (01:34:22):
We've been talking a lot about that. Can you unpack that a little bit?

Ron Shaich (01:34:26):
Sure. It's really simple. People often think of entrepreneurs as risk-takers. I think of myself and most entrepreneurs as risk-avoiders. I think that we focus on what is the thing that matters the most differently. So for me, when I see an opportunity, when I smell an opportunity, when I can feel a better way to do something and I know it, I get through it, I experience it, and I know that's a better opportunity, when I get there, protecting that opportunity and protecting my ability to accomplish that is the thing I least want to risk. So if I have to take on debt, that's not a big risk. It's that opportunity that I'm trying to protect. So what you think of as risk taking, I think of it as risk protecting. The thing I care about so profoundly is arriving at the accomplishment of the objective of what I saw and felt.

David Segal (01:35:23):
Missing the opportunity is the risk for you.

Ron Shaich (01:35:25):
Totally. It's the biggest risk.

David Segal (01:35:28):
Wow.

Harley Finkelstein (01:35:28):
Yeah. I know we got to go, but the one thing I'm really left with is that you have figured out that the thing, the catalyst for you that actually creates the most impact on the world and most change for you personally, is entrepreneurship, is business. Because you can do so much-

Ron Shaich (01:35:44):
To be honest with you, it's not even entrepreneurship. It's actually building organizations. I don't think of myself as an entrepreneur in that sense

David Segal (01:35:52):
Because you didn't start Au Bon Pain. You didn't start Panera Bread.

Harley Finkelstein (01:35:55):
In fact, you actually don't suffer, a lot of our other guests have said, I want to create something on my own brand new. You actually, you don't have the fear of like, it's not created here syndrome kind of thing. You see this thing, you're like, that's a great idea. I see an opportunity.

Ron Shaich (01:36:10):
I would say everything that I've built, I've actually put massive fingerprints on. They're very different than what they started as.

Harley Finkelstein (01:36:19):
Yes.

Ron Shaich (01:36:19):
What my greatest pride is in figuring it out when the rest of the world doesn't. To me, it's the figuring out that's powerful.

Harley Finkelstein (01:36:26):
It's a puzzle for you.

Ron Shaich (01:36:27):
Yeah, and there's a fascination, and then actually building it. Done. Know what matters and then getting it done. I will tell you, just the next piece of it for me, after I sold Panera and the largest US restaurant deal ever done-

Harley Finkelstein (01:36:42):
7 billion?

Ron Shaich (01:36:43):
Seven and a half billion.

Harley Finkelstein (01:36:45):
Seven and a half billion. Sorry, I ran it down by half a billion.

Ron Shaich (01:36:46):
Yeah.

Harley Finkelstein (01:36:46):
$7.5 billion. Incredible.

Ron Shaich (01:36:48):
Yeah. Somebody fell in love. One of the things I often think about is I spend my life building a better competitive alternative. Building a company, that's different than when you harvest, and I separate the two.

Harley Finkelstein (01:37:01):
Wow.

Ron Shaich (01:37:02):
Harvesting is I'm not about value creation. I'm about building something that's a better entity. Then when somebody else falls in love with it and they view it as extraordinarily valuable, they want it. If they really want it bad enough, I may be willing to give it to. That's the harvesting.

(01:37:18):
Just to add to this and then we'll wrap. One of the things I believe that's profoundly important is reducing the pervasive short term- ism in our capital markets and our politics, and in fact, often in our lives. That's what long-term self-respect is. After I sold Panera, I began speaking around the country on the pervasive short term-ism in our capital markets and I did so as somebody who won at it. What that led to, I ultimately said, "You know what? I got to take my own money and put it where my mouth is." I took a quarter of a billion dollars of my own money, my family money, and I created an entity called Act Three. It's an investment vehicle, but it's all my money and my family's money, and some of the people that work with me put money into it.

Harley Finkelstein (01:38:06):
Not a wide LP base?

Ron Shaich (01:38:07):
There's no LPs whatsoever.

Harley Finkelstein (01:38:09):
Wow.

Ron Shaich (01:38:10):
Period. It's our money.

David Segal (01:38:11):
Family office-

Ron Shaich (01:38:12):
It's a family office.

Harley Finkelstein (01:38:12):
Yeah.

Ron Shaich (01:38:16):
Over that period of time, we basically have three operating principles. The first one is founder-friendly. Well, our core operating principle is we are about building a better competitive alternative. In order to do that, we want our management teams focused on that and not a whole bunch of other things. Not capital raising, not scaling. So what we have done is founder-friendly capital. We'll come in, we'll make an investment. We'll take a right of first refusal on all follow-on rounds of capital. We've never turned down any of those rights of first refusal. So all of the companies in which we're invested in know that they will have-

Harley Finkelstein (01:38:53):
They can rely on you

Ron Shaich (01:38:54):
Unlimited capital.

Harley Finkelstein (01:38:56):
Wow.

Ron Shaich (01:38:56):
That's number one. Number two, when we sit in the boardroom, we practice what we call Sherpa management. What I mean by that is building a nationally dominant company is tougher than climbing Mount Everest. Nobody's ever climbed Mount Everest without a Sherpa. Our role in the boardroom is to be the Sherpa, which means mistake avoidance. More than anything else, we're trying to help and think about what's going to hit you in three years that if you don't think about now-

Harley Finkelstein (01:39:21):
You're climbing yourself?

Ron Shaich (01:39:22):
We're there.

Harley Finkelstein (01:39:23):
Right. Yeah.

Ron Shaich (01:39:24):
We're in that boardroom not asking about liquidity, because we almost never sell. We're asking what's it going to take to build a better competitive alternative? Every one of my partners, I have 25 people in the group, every one of them has got a functional capability to add value, strategy, real estate, large scale operational scaling.

Harley Finkelstein (01:39:44):
It's like the Avengers almost.

Ron Shaich (01:39:46):
Yeah. So what we'll do for any of our investments, we'll say, "Don't worry about scaling it. You're welcome to take our skills. We'll give it to you on a cost plus basis. It's a pull, not a push, and if you want it, you got it." Then third, I really believe deeply in my own competitive advantage. If I'm competing in the restaurant industry, I'm generally going to have a little more perspective than you are. I will not ever drop money in a casino. I don't like losing unless I own the casino and have the house vig. That's why I think about investing. If you're in my industry, I got the house vig. Ultimately, what we bet on are categories. What are the niches that are going to have tailwinds in five years? Then we come behind that and we have the capability of helping build the dominant brand in each of those categories. Working-

David Segal (01:40:35):
That's more important than finding the best player in the niche, because that's going to change.

Ron Shaich (01:40:39):
No. Right. We have to make sure we got the right niche. So we made a bet on Mediterranean. We helped build Cava. I actually came to them with an idea of buying a public company five times larger to scale and then I put in the capital to help them actually make-

Harley Finkelstein (01:40:55):
Do it themselves.

Ron Shaich (01:40:55):
That acquisition, and off we went. It's now an $8 billion company.

Harley Finkelstein (01:41:01):
Incredible story. Cava's amazing.

Ron Shaich (01:41:02):
Yeah. Cava's done amazing.

David Segal (01:41:03):
Ron, what's chutzpah mean to you?

Ron Shaich (01:41:08):
The willing to take it on when lots of people are, including yourself, maybe pushing against it.

Harley Finkelstein (01:41:15):
Thank you.

Ron Shaich (01:41:15):
Thank you.

Harley Finkelstein (01:41:16):
Appreciate you sitting down with us.

David Segal (01:41:18):
Thank you so much. This has been amazing. It's an honor to sit with you.

Ron Shaich (01:41:21):
My pleasure.

David Segal (01:41:22):
Harley often says, "We stand on the shoulders of giants who came before us."

Ron Shaich (01:41:26):
We all do.

David Segal (01:41:27):
As two entrepreneurs, you've been an inspiration without even knowing it to both of us, and we really appreciate you.

Ron Shaich (01:41:32):
Good luck to you guys.

David Segal (01:41:32):
I know this episode will resonate, so thank you.

Ending Song (01:41:37):
Started from the bottom, now we're here.

Ron Shaich (01:41:38):
All right. Got it. Thank you.

Ending Song (01:41:38):
Started from the bottom, now the whole team here. Started from the bottom, now we're here.